AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Tumbles on Disappointing GDP Data

The New Zealand and Australian Dollars are under pressure early Thursday with the Kiwi plunging in reaction to a New Zealand GDP report that matched expectations, but came in slightly below the previous read.

At 0514 GMT, the NZD/USD is trading .6833, down 0.0032 or -0.47% and the AUD/USD is at .7358, down 0.0011 or -0.15%.

New Zealand GDP

According to the New Zealand government, economic growth in the first quarter eased slightly, with Gross Domestic Product (GDP) expanding 0.5% – in line with market expectations.

GDP per capita remained low, unmoved from the December quarter at 0.1% and 0.6% year-on-year.

The March quarter growth figure was 0.1% lower than each of the two previous quarters. As an annual measure, New Zealand’s economy grew 2.7% in the year to March.

Both Aussie and Kiwi traders remain on edge amid ongoing fears of a trade war with China although U.S. Commerce Secretary Wilbur Ross tried to soothe fears by saying the U.S. was aiming for free trade, not a trade war.

Global tensions have remained at heightened levels most of the week after U.S. President Donald Trump threatened Monday to hit US$200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated against his previous targeting of US$50 billion in imports.

New Zealand Current Account

In other economic news, early Wednesday, the New Zealand current deficit widened to a seasonally adjusted $3.1 billion in the March quarter versus a seasonally adjusted $2 billion deficit in the December quarter. According to Stats NZ, the seasonally adjusted deficit was due to a drop in exports and record high imports.

The NZD/USD showed little response to the report.

U.S. Existing Home Sales

In the U.S., existing home sales unexpectedly fell in May as an acute shortage of properties on the market pushed house prices to a record high.

The National Association of Realtors said on Wednesday that existing home sales slipped 0.4 percent to a seasonally adjusted annual rate of 5.43 million units last month. Economists were looking for an increase of 5.52 million units or a rate of 1.5 percent.

RBA Governor Philip Lowe Comments

Finally, at a central bankers’ conference in Sintra, Portugal, Reserve Bank of Australia Governor Philip Lowe said he is worried less about Australia’s low inflation than he is concerned about trying to nudge it higher too quickly.

Lowe said, “I remain confident we’re going to get back to 2.5 percent, it’s just going to take us a bit of time.” He further added, “To try to get it back to 2.5 very quickly, it would be mainly through people borrowing more money, and having higher asset prices – I think that’s a much bigger risk to our economy than people having surprisingly low inflation expectations.”

Lowe finished by saying that “very high” debt levels and asset prices are the “No. 1 domestic risk” in Australia.