AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Sees Wage, Price Pressures, Lower Rates for Some Time

The Australian Dollar is trading higher on Tuesday following a strong rebound the previous session and the release of the minutes from the Reserve Bank of Australia’s (RBA April policy meeting. Lower Treasury yields and a weaker U.S. Dollar helped boost the Aussie on Monday.

At 02:35 GMT, the AUD/USD is trading .7788, up 0.0030 or +0.39%.

Australia Central Bank Sees Faster Economic Recovery from Pandemic, Price Pressures Still Elusive

Australia’s economic recovery has surpassed all expectations with an “above-trend” expansion likely this year and next, though the country’s central bank is still in no hurry to tighten policy settings, minutes of its April policy meeting showed on Tuesday, Reuters reported.

The Reserve Bank of Australia (RBA) left rates at a record low 0.10% at its April 6 meeting while reiterating its commitment to keep policy accommodative for as long as is necessary to pull down unemployment and push inflation higher.

The minutes showed the RBA would maintain this supportive policy stance until actual inflation is sustainably within its 2-3% target range, a goal it does not expect to meet before 2024.

“Overall, preliminary data suggested that GDP in the March quarter was likely to have recovered further to around its pre-pandemic level, earlier than previously expected,” the minutes showed.

The A$2 trillion economy is expected to expand at an “above trend” pace this year and next, the RBA said.

“Despite these generally positive developments, wage and price pressures had remained subdued and were expected to remain so for several years,’ according to the minutes.

“The economy had been operating with considerable spare capacity and the unemployment rate was still too high.”

The RBA has recently said the unemployment rate needs to be in the “low 4s” or “high 3s” to generate wage and price pressures, from 5.6% now.

Finally, board members discussed the house price increase and were briefed on the RBA’s regular half-yearly assessment of financial stability risk which was published on April 9.

Daily Forecast

The RBA really didn’t surprise anyone and its comments seemed similar to that of the U.S. Federal Reserve when it said it would maintain this supportive policy stance until actual inflation is sustainability within its 2-3% target range, a goal it does not expect to meet before 2024.

With the RBA minutes out of the way, traders are likely to continue to focus on the direction of Treasury yields. Stronger U.S. economic data could put a lid on the Aussie Dollar. Essentially, we’re expecting to see a battle between those who think the U.S. economy will recover faster than the Australian economy and those who feel Australia’s economy will recover at a faster pace.