AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Minutes Continue to Forecast Low Rates

The Australian and New Zealand Dollars are trading lower early Tuesday. The Aussie is retreating from a two-week high reached on Friday. The Kiwi is trading at its lowest level since December 11.

At 0726 GMT, the AUD/USD is trading .7517, down 0.0008 or -0.10% and the NZD/USD is at .6913, down 0.0001 or 0.01%.

The Aussie fell after the Reserve Bank of Australia signaled it would keep rates steady for some time while the Kiwi hit another six-month low as the greenback inched up amid hopes of easing global trade tensions.

Earlier today, the RBA released the minutes from its last monetary policy meeting. The central bank inserted a new line in the minutes saying “it would be appropriate to hold the cash rate steady and for the Reserve Bank to be the source of stability and confidence.”

In other news, the prospects of a thaw in U.S.-China trade tensions supported the U.S. Dollar on Monday as President Donald Trump pledged to help Chinese telecom company ZTE Corp “get back into business fast.” The comments on Sunday came ahead of a second round of trade talks between U.S. and Chinese officials this week.

New Zealand government bonds eased, sending yields one basis point higher towards the long end of the curve. Australian government bond futures slipped, with the three-year bond contract down 4.5 ticks at 97.765. The 10-year contract dipped 5.5 ticks to 97.160.

Forecast

Once again the divergence in the monetary policies of the hawkish U.S. Federal Reserve and the dovish RBA and RBNZ is dictating most of the price action. Not only is solid economic data supporting the Fed’s move toward higher interest rates, but the comments from Fed members are also indicating that FOMC members are on the same page for future rate hikes.

On Tuesday, investors will likely react to the U.S. Retail Sales report. Core Retail Sales are expected to come in at 0.5% and Retail Sales at 0.4%. Strong numbers will indicate economic growth.

Minor reports include the Empire State Manufacturing Index, Business Inventories, NAHB Housing Market Index and TIC Long-Term Purchases. FOMC Member Williams is also scheduled to speak.

In Australia, investors along with the RBA continue to monitor housing credit, including availability and demand. In focus for traders is Wednesday’s Wage Price Index and Thursday’s employment data.

New Zealand Dollar traders will react to the dairy auction due on Wednesday. Later this week, the new center-left Labor government will release its first annual budget.