AUD/USD and NZD/USD Fundamental Daily Forecast – Slow Trade Ahead of Central Bank Decisions

The Australian and New Zealand Dollars are trading mixed on Monday with the Aussie losing a little ground and the Kiwi slightly better. There’s not a lot going on in the markets at this time especially with Australia on a bank holiday, and central bank meetings later this week. Investors are primarily keeping an eye on US-China trade relations.

At 0106 GMT, the AUD/USD is trading .7397, down 0.0009 or -0.02% and the NZD/USD is at .6749, up 0.0001 or +0.01%.

Both Forex pair finished higher on Friday after the U.S. Dollar came under some pressure after data showed U.S. job growth slowed in July. It also slipped against the Yuan after the Chinese central bank acted to stabilize the currency by stemming speculation against it.

The Chinese currency rebounded from a 15-month low hit earlier in the session, after China’s central bank said it would set a forward reserve requirement ratio of 20 percent – up from an earlier zero – from Monday for financial institutions settling foreign exchange forward Yuan positions.

Forecast

Looking ahead to later this week, the Reserve Bank of Australia is scheduled to hand down its monetary policy decision on Tuesday, followed by the Reserve Bank of New Zealand on Thursday.

The RBA is expected to leave its key interest rate at 1.50% for a record 24 months (two years) on Tuesday ahead of releasing the third Statement of Monetary Policy for the year on Friday.

The RBA is probably going to say that it sees economic growth and a gradual rise in inflation along with strong infrastructure investment, rising business investment and strong export volumes. On the negative side, it may mention that the economy has seen a peak in the housing construction cycle, uncertainty about the outlook for consumer spending, the weakening Sydney and Melbourne property markets, low inflation and wages growth and tight bank lending standards.

The RBNZ will likely make similar arguments to those from the RBA when it releases its decision on Thursday. It is widely expected to leave its benchmark interest rate at 1.75% because of low inflation, high household debt and weak consumer spending.

In the U.S., the major report will be the US Consumer Price Inflation report, due to be released on Friday. No change is expected with the annual rate staying around 2.3%.

China’s trade and inflation data for July will also be issued this week. July trade data on Wednesday is expected to show import and export growth of around 10% year on year with consumer price inflation, on Thursday, remaining around 1.9% year on year and producer price inflation showing an annual rate of 4.4%.