AUD/USD and NZD/USD Fundamental Daily Forecast – Mixed Trade but Commodity-Linked Currencies Well-Supported

The Australian and New Zealand Dollars are trading mixed on Tuesday, basically mirroring price action in the global equity markets as risk traders take a breather with both eyes on potential U.S. coronavirus-relief and the on-going surge in COVID-19 cases that threaten to derail the global economic recovery.

Of the two, the Aussie is edging higher, while the Kiwi is inching lower. Both commodity-linked currencies have been supported lately by a plunge in the U.S. Dollar as demand for risk jumped after the announcement of two successful vaccine trials.

Expectations of additional fiscal stimulus in the U.S. have been driving down Treasury yields, helping to widen the spread between Australian and New Zealand Government bond yields and U.S. Government bond yields, making both the Australian and New Zealand Dollars attractive assets.

At 10:43 GMT, the AUD/USD is trading .7426, up 0.0006 or +0.09% and the NZD/USD is at .7041, down 0.0001 or -0.01%.

Australia Business Sentiment Soars in November as Virus Restrictions Ease

A measure of Australian business confidence and conditions surged in November to “above average” as the second-largest state of Victoria emerged from its lengthy virus-induced lockdown and other states opened their borders to each other.

National Australia Bank’s Index of Business Confidence jumped 9 points in November to +12, clocking its fourth straight monthly gain, while conditions surged 7 points to +9.

The conditions index has come a long way since hitting a trough of -34 in April at the height of the coronavirus pandemic and surpassing its long-run average of +6 in November as Australia reopened its economy earlier than expected, Reuters wrote.

“Encouragingly, other lead indicators improved in the month:  capacity utilization saw a large gain and forward order turned positive, the latter suggesting that the pipeline of work has begun to build,” said NAB Group Chief Economist Alan Oster.

“That said, there is some way to go before a full recovery is reached,” he added.

Forward orders rose to +6, while capacity utilization jumped to 79.3%.

“What is promising, is that the measure suggests that there will be another large rise in activity in the December quarter,” Oster said.

Daily Forecast

“The goldilocks label is…starting to look quite apt for the Australian economy,” Credit Suisse portfolio manager Jasmin Argyrou said.

In general our economy is faring a lot better than we originally feared when the pandemic first started…we haven’t seen consumer confidence this high for about seven years and we’re starting to see business confidence and business conditions pick up quite rapidly as well.”

Global sentiment could slow over the near-term, which could produce mild corrections, however, we think the long-term uptrend will remain intact. This is primarily due to rising commodity prices and resilient local economies.