AUD/USD and NZD/USD Fundamental Daily Forecast – It’s Hard to Be Bullish in the Wake of New COVID Restrictions
The Australian and New Zealand Dollars finished mixed on Friday with the Aussie, viewed as a proxy for risk appetite, posting a fourth straight weekly loss.
With half the Australian population under lockdown, economists said the country’s central bank could increase stimulus rather than decrease it at its next policy meeting. Meanwhile, Kiwi traders are still debating whether the Reserve Bank of New Zealand (RBNZ) will follow-through with it plan to raise the OCR 25 basis points at its August meeting.
Helping to cap the Aussie and Kiwi was the U.S. Dollar which was on course for a second week of gains after a turbulent few days when currencies were buffeted by shifting risk appetite, with the market’s focus now on next week’s Federal Reserve meeting.
Risk appetite among investors remained high on Friday, with U.S. stocks rising and U.S. Treasuries selling off. Although the Aussie and Kiwi finished mixed, the commodity currencies were well-bid on the day.
Australia Tightens Sydney Lockdown in ‘National Emergency’ COVID-19 Scare
Australia’s New South Wales state on Friday reported its biggest daily rise in new COVID-19 cases this year, prompting a tighter lockdown in Sydney in what state officials called a “national emergency” that has already derailed a broad economic rebound.
State Premier Gladys Berejiklian also raised the likelihood that stay-at-home orders for the country’s biggest city would be extended beyond the current end-date of July 30.
“There is no doubt that the numbers are not going in the direction we were hoping they would at this stage,” Berejiklian said as she announced 136 new cases in New South Wales.
New Zealand Shuts Down ‘Travel Bubble’
New Zealand Prime Minister Jacinda Ardern on Friday suspended for at least eight weeks the so-called “travel bubble” with Australia that allows movement between the two countries with quarantine.
The Trans-Tasman bubble was a rare quarantine-free arrangement in Asia, where countries have kept their borders mostly closed during the pandemic.
Although for some traders the main focus will shift this week to the U.S. Federal Reserve’s monetary policy decisions on Wednesday, its announcement’s may have to take a backseat to the COVID developments in Australia and New Zealand.
I don’t think there is anything the Fed could say that could boost the Aussie and Kiwi with the new shutdowns likely to slow economic growth, curtailing the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) plans to begin tightening policy.