AUD/USD and NZD/USD Fundamental Daily Forecast – Investor Indecision Ahead of Fed Policy Decisions

The concern for traders is not likely whether the Fed cuts rates or not at the June meeting, but how dovish it comes across for cuts in July or September. The market has been driving Treasury yields lower due to uncertainty over trade and geopolitics, the economy has been steady to weaker. Fed policymakers may not be influenced by the external events as much and may maintain focus on the economic data.
James Hyerczyk
AUD/USD and NZD/USD

The Australian and New Zealand Dollars are trading mixed on Monday. The Aussie is trading inside Friday’s wide range, which indicates investor indecision and impending volatility. Furthermore, buyers may be coming in to defend the May 17 main bottom at .6864. The Kiwi is up, but inside Friday’s range with buyers likely coming in to defend the May 23 bottom at .6481 and the October 16, 2018 main bottom at .6465.

At 11:24 GMT, the AUD/USD is trading .6868, down 0.0004 or -0.07% and the NZD/USD is at .6507, up 0.0016 or +0.23%.

Domestic economic weakness and fear that the U.S. economy may not be as weak as previously suspected has been driving the AUD/USD and NZD/USD lower the past two weeks. Traders are anticipating rate cuts by the Reserve Bank of Australia and the Reserve Bank of New Zealand as early as July, but the odds of a U.S. rate cut in June were dampened last week with the release of mixed economic data.

In Australia, the economy added more jobs than expected in May, but the unemployment rate came in higher than expected at 5.2%, raising the alarm that the RBA will cut in July.

In the U.S., concerns were raised over weaker consumer inflation data, but these worries were offset by firm producer inflation data and better-than expected news on retail sales. Traders are saying strong U.S. retail sales on Friday reduced the chances of a rate cut in June and underpinned the U.S. Dollar. Nonetheless, investors still feel Fed Chairman Jerome Powell will leave open the possibility of future rate cuts.

According to the CME Group’s FedWatch tool, expectations of a rate cut at the Fed’s June 18-19 meeting fell from 28.3% on Thursday to 21.7% after the retail data. However, bets for monetary easing at the July meeting remain at 85% and for September at 70%.

The concern for traders is not likely whether the Fed cuts rates or not at the June meeting, but how dovish it comes across for cuts in July or September. The market has been driving Treasury yields lower due to uncertainty over trade and geopolitics, the economy has been steady to weaker. Fed policymakers may not be influenced by the external events as much and may maintain focus on the economic data.

Furthermore, a resumption of trade talks between the United States and China may turn Treasury traders optimistic at any time. For example, at the G20 summit, U.S. President Trump and Chinese President Xi Jinping may meet and decide to resume trade talks like they did in December. This could be a positive that prevents the Fed from cutting rates aggressively.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US