AUD/USD and NZD/USD Fundamental Daily Forecast – RBA’s Lowe Favors Lower Aussie, but Taking No Action

The Australian and New Zealand Dollars are picking up where they left off last week with the Aussie grinding higher and the Kiwi drifting lower. The offsetting moves are being influenced by a Reserve Bank of Australia (RBA) official’s comments for more fiscal stimulus and a Reserve Bank of New Zealand (RBNZ) policymakers’ decision to increase the amount of quantitative easing.

At 03:40 GMT, the AUD/USD is trading .7188, up 0.0015 or +0.21% and the NZD/USD is at .6534, down 0.0009 or -0.14%.

RBA Governor Lowe Calls on Government to Do More

Last week, RBA Governor Philip Lowe entered the debate over monetary financing, which involves increasing spending and at the same time creating the money needed to pay for it – typically via central banks. They can either buy the bonds sold by a government to cover gaps in its budget – or simply offer an overdraft, so that no bonds need to be issued in the first place, according to Bloomberg.

“I want to make it clear that monetary financing of the budget is not on the agenda in Australia,” the governor said.

Lowe Sees No Economic Growth Until Last Quarter

Australia’s central bank chief said economic growth is unlikely to lift until the final three months of this year, with Victoria’s renewed lockdown to contain its COVID-19 outbreak “broadly offsetting” the recovery that’s been unfolding elsewhere.

“People’s attitudes to spending are changing because of the pandemic,” Governor Philip Lowe told a parliamentary panel Friday via video conference. “It is probable that households and businesses will remain more cautious and that this will affect consumption and investment. How long this change might last is hard to tell.”

Governor Lowe Prefers Lower Currency to Help Spur Employment

The RBA chief said Australia’s better economic outcomes relative to developed-world counterparts and the strength of commodity prices meant the currency was broadly at fair value. It has surged 25% from its March low.

Lowe also pushed back against a suggestion the bank should intervene to push the Aussie dollar lower, saying he didn’t think the RBA would be very successful. Intervention only tends to work, he said, when the market is dislocated or the currency has strayed well above or below its fair value.

Daily Forecast

The AUD/USD is edging higher on Monday because comments from Governor Lowe about his preference for a lower currency carried little weight. He’s against central bank intervention designed to drive the Aussie lower and he’s doesn’t like the idea of negative interest rates either. Meanwhile, bullish investors continue to ride the weaker U.S. Dollar and increasing risk sentiment.