AUD/USD and NZD/USD Fundamental Daily Forecast – Looking for Weakness into Fed Minutes

The Australian and New Zealand Dollars continued their rally on Tuesday as investors returned from Monday’s bank holiday and the long week-end. Both currencies hit multi-month highs in reaction to a weaker U.S. Dollar. However, buyers backed off into the close as investors began preparing for this week’s slew of major U.S. economic data including the Fed minutes on Wednesday.

The AUD/USD settled at .7829, up 0.0026 or +0.33% and the NZD/USD finished the session at .7102, up 0.0016 or +0.22%.

Both currencies also rallied on the back of stronger-than-expected Chinese economic data and strength in Chinese stocks.

Forecast

The Aussie and Kiwi are under pressure early Wednesday. At 0609 GMT, the AUD/USD is trading .7823, down 0.0005 or -0.07%. The NZD/USD is at .7096, down 0.0005 or -0.07%.

Early Tuesday, the Australian Commodity Prices Index fell 5.9% on an annual basis. The previous report was revised downward to -4.0%. In New Zealand, the GDT Price Index came in at 2.2% versus the previous -3.9%.

There was only one U.S. report on Tuesday. The Manufacturing Purchasing Managers Index for December rose to a reading of 55.1 from November’s 53.9, marking the quickest pace in over two years, research firm HIS Markit said in its latest report. The December figure was slightly higher than the market consensus of 55.0. Economists had estimated that it would remain flat at 55.0.

There were no major reports from Australia or New Zealand scheduled for Wednesday.

On Wednesday, investors will get the opportunity to react to the U.S. Federal Reserve minutes of its December FOMC monetary policy meeting, an event where the Fed raised the Federal funds rate by an additional 25 basis points.

Most of the focus will likely be on the FOMC commentary relating to the inflation outlook given the Fed’s underlying consumer inflation (CPI) forecasts were left unchanged at this meeting despite most members factoring in the impact of tax cuts delivered by the Trump administration in late December.

The minutes will be released at 1900 GMT. Hawkish minutes will be supportive for the U.S. Dollar. This should pressure the AUD/USD and NZD/USD. However, look for a possible spike to the upside if the Fed minutes are perceived as dovish.