AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Underpinned by Rate Hike Talk, Easing of Virus Curbs

The Australian and New Zealand Dollars are edging lower early Tuesday as investors position-themselves ahead of key U.S. inflation data. Both currencies are coming off strong performances the previous session.

The risk-sensitive Aussie was supported by higher commodity prices. The Kiwi put in the best performance of the two as speculators reacted to rumors the Reserve Bank (RBNZ) could raise rates by 50 basis points (bps) at its November 24 meeting.

At 02:26 GMT, the AUD/USD is trading .7408, down 0.0016 or -0.22% and the NZD/USD is at .7162, down 0.0005 or -0.07%.

Traders are also gearing up for consumer price data from both China and the United States on Wednesday. The numbers could test central bankers’ promises of patience. Additionally, economists expect to see profound pressure on factory gate prices in China which can flow through global supply chains, and U.S. consumer prices galloping ahead. The early estimates call for the China Producer Price Index (PPI) to come in at 12.2%, up from 10.7%.

Kiwi Jumps as New Zealand Plans to Ease Virus Curbs in Auckland

The New Zealand Dollar rose sharply on Monday on news the country will ease coronavirus restrictions in its biggest city from Wednesday as vaccinations rates rise and lockdown measures will likely be phased out by the end of the month, Prime Minister Jacinda Ardern said.

The city of Auckland has been in lockdown for nearly three months as the infectious Delta variant of the coronavirus spread, infecting more than 4,500 people since August in New Zealand’s worst phase of the pandemic.

But a pick-up in vaccination rates and mounting pressure from critics calling for more freedoms, have prompted Ardern to end the curbs. The country’s full vaccination rate is expected to hit 90% within a few weeks, a key threshold the government has said must be met in order for lockdowns to be eased.

“Auckland has worked so hard to get their vaccination rates high, they deserve to be able to move as soon as they hit those targets regardless of what’s happening in the rest of the country,” Ardern told a news conference on Monday.

RBNZ Could Rates Official Cash Rate by 50 Basis Points at Next Meeting

According to the analysts at Teletrade, the New Zealand economy has performed much better than expected so far in 2021, with the latest jobs data showing the unemployment rate dropping to 3.4% in Q3, well below any economist/RBNZ estimate of NAIRU (the “natural” rate of unemployment, below which inflationary pressures will build).

A prompt reopening after a recent strong jobs report has some analysts calling for a 50bps hike at the next RBNZ meeting.

“We see an increased chance of a 50bps hike at the November RBNZ meeting, given the following meeting won’t take place until February 2022”, said Citi.