AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Pressured Ahead of RBNZ Decisions

The NZD/USD is under pressure because the Reserve Bank of New Zealand is expected to leave interest rates unchanged at its policy meeting on Wednesday, but may adopt a more dovish tone and cut growth forecasts.
James Hyerczyk

The Australian and New Zealand Dollars are trading mixed on Tuesday with the Aussie posting a small gain and the Kiwi a slight loss. The Australian Dollar opened slightly better on the back of a better-than-expected NAB Business Confidence report, but fell to its low for the session following the release of a worse-than-expected Home Loans report. In New Zealand, the Inflation Expectations report came in unchanged at 2.0%. However, trading was light ahead of the Reserve Bank of New Zealand’s interest rate and monetary policy decisions on Wednesday.

At 07:42 GMT, the AUD/USD is trading .7079, up 0.0018 or +0.23% and the NZD/USD is trading .6730, down 0.0002 or -0.03%.

NAB Business Confidence Report

The good news for the Australian Dollar earlier today was the NAB Business Confidence report. The NAB Survey showed that Australian business conditions rebounded in January, reducing the risk of a pronounced slowdown in hiring and investment in the months ahead.

According to the National Australia Bank’s (NAB) monthly business survey, the conditions index rose 4 points to +7, partially recovering after having fallen by the most since the GFC in December. “Conditions rebounded somewhat after the sharp decline last month,” said Alan Oster, Chief Economist at the NAB.

“We had noted that seasonality and statistical volatility may have driven some of the result but that the trend in conditions had been down.”

“The January survey confirms this, and while we don’t think activity in the business sector has crashed, we think that there has been some loss in momentum.”

Aussie Home Loans Sink

The total number of home loans issued in Australia was down a seasonally adjusted 6.1 percent on month in December, the Australian Bureau of Statistics said on Tuesday. That was lower than expectations for a drop of 2.0 percent following the 0.9 percent contraction November. The value of loans sank 5.3 percent on month, also missing expectations for a decline of 3.3 percent following the 1.4 percent fall in the previous month.

Daily Forecast

The AUD/USD is getting some support early Tuesday because of improved risk sentiment due to reports of a possible deal between Republicans and Democrats to avoid a government shutdown starting Saturday. However, gains are being limited by last week’s dovish remarks from Reserve Bank Governor Philip Lowe. Technically, oversold conditions could also be underpinning prices.

The NZD/USD is under pressure because the Reserve Bank of New Zealand is expected to leave interest rates unchanged at its policy meeting on Wednesday, but may adopt a more dovish tone and cut growth forecasts.

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