AUD/USD and NZD/USD Fundamental Daily Forecast – Gains Capped by Bleak Economic Outlook

The Australian Dollar is trading nearly flat on Friday after giving back earlier gains. The price action suggests investors are uncertain about how to play the currency with some looking at the past and some making decisions based on future conditions.

Thursday’s unemployment data is being thrown out the window because it didn’t account for the number of jobs lost during the country’s coronavirus-related lockdowns. Those investors leaning to the upside are citing the recovery in the global equity markets as one reason to be optimistic, while those bearish souls realize that while the world may be trying to emerge from lockdowns, there are still risks of a resurgence, not enough tests available and no vaccine either. Furthermore, they look at China’s economic data and realize the Australian economy is far from recovery. Some even think the worst is yet to come.

At 08:24 GMT, the AUD/USD is trading .6326, up 0.0006 or +0.12%. This is down from a session high of .6385.

Australia to Retain Coronavirus Curbs for at Least Another Four Weeks

Australia will retain curbs on public movement for at least four more weeks, Prime Minister Scott Morrison said on Thursday, dashing speculation the sustained low growth in new cases could spur a quicker return to normal.

Morrison said the rules would not be relaxed until national testing capacity has been increased, contact tracing of know COVID-19 cases expanded and a response to any future outbreak fully prepared.

“We want to be very clear with Australians, baseline restrictions we have in place at the moment, there are no plans to change those for the next four weeks,” Morrison told reporters.

China’s First-Quarter GDP Drops Sharply

China’s first-quarter GDP shrank 6.8% in 2020 as compared to a year ago, according to data from the National Bureau of Statistics of China.

That was the first quarterly decline since 1992, when official quarterly GDP reports started, according to Reuters. Analysts polled by Reuters had expected China’s GDP to have fallen 6.5% from last year, a sharp drop from the 6% growth recorded in the fourth quarter of 2019.

Retail sales also fell more than expected in March, but industrial output only dipped slightly, suggesting its manufacturing sector at least is recovering more quickly.

Australian Employment Better – But There is a Catch

On the economic data front, Australia’s unemployment rate in March came in at 5.2% on a seasonally adjusted basis, according to data from the country’s bureau of statistics. That was better than expectations of a 5.5% unemployment rate for the month in a Reuters poll.

However, the Australian Statistics Bureau cautioned that the data on March employment covered just the first two weeks of the month – before lockdown measures to contain the coronavirus spread kicked in.