AUD/USD and NZD/USD Fundamental Daily Forecast – Gains Capped by Demand for Safe-Haven US Dollar

The Australian and New Zealand Dollars are trading slightly better early Thursday, helped a small boost in demand for risky assets. Helping to put a lid on prices is demand for the U.S. Dollar, which is rising as investors rush to the safety of the world’s most liquid currency given the massive disruption to global trade due to the coronavirus pandemic.

At 07:21 GMT, the AUD/USD is trading .6112, up 0.0038 or +0.62% and the NZD/USD is at .5967, up 0.0047 or +0.80%.

On Wednesday, the Aussie and Kiwi were pressured by dire comments from U.S. President Donald Trump who warned Americans of a “painful” two weeks ahead in fighting the coronavirus even with strict social distancing measures.

Australian Economic Data

The data has been mixed so far this week, which may be contributing to the sideways to lower trade. On Monday, Private Sector Credit came in at 0.4%, matching the previous month’s revision while beating the estimate.

The AIG Manufacturing Index rose to 53.7, higher than the previously reported 44.3.

RBA Sees ‘Very Material’ Contraction

Early Wednesday, the Reserve Bank of Australia (RBA) said in its emergency meeting minutes that policymakers were worried about the potential for a “very material contraction” in economic activity.

The RBA held an out-of-cycle meeting on March 18 when it reduced its cash rate to a record low 0.25% and embarked on a bond buying program to shield the economy from the devastation caused by the coronavirus pandemic.

The minutes showed members agreed the cash rate was now at its effective lower bound and that policymakers had “no appetite” for negative interest rates, implying further cuts were not on the cards.

The RBA holds its next monthly rate review on April 7.

Policymakers also noted the extraordinary measures “would not have been under consideration in normal times.”

Members said in discussions that it was not possible to provide an updated set of economic forecasts, given the “fluidity of the situation” though it was “likely that Australia would experience a very material contraction’, the minutes showed.

NAB Quarterly Business Survey – March 2020

The National Australia Bank said both business conditions and confidence declined sharply in Q1. Around half of the survey responses were collected in late February and early March – well before significant lockdowns. These results were released as part of the Monthly Business Survey for February. The second half of the sample was collected through to mid-March, as more containment measures were announced and uncertainty rose. Business conditions are now -3 (down 9 points from Q4) and confidence declined to -11 index points (down 9 points).

Daily Forecast

The AUD/USD and NZD/USD could tread water until the U.S. starts to release a slew of economic data at 11:30 GMT.

The first report is Challenger Job Cuts. It shows the change in the number of job cuts announced by employers. It is expected to show a surge in job cuts.

Weekly Unemployment Claims at 12:30 GMT is the major economic report. It is expected to show that 3.6 million Americans filed for unemployment last week. This is up from the previous week’s 3.238 million.

In other news, the U.S. Trade Balance is expected to shrink to -40.6 billion from -45.3 billion.

Factory Orders at 14:00 GMT are expected to show a slight 0.2% rise.