AUD/USD and NZD/USD Fundamental Daily Forecast – Trading Slightly Better Ahead of Slew of Chinese Economic Data

The Australian and New Zealand Dollars are trading slightly higher early Monday as investors await the release of a slew of economic data from China. The data includes reports on Gross Domestic Product, Fixed Asset Investment, Industrial Production, Retail Sales and the Unemployment Rate. There will also be a NBS Press Conference. The reports are expected to be released at 0200 GMT.

At 0130 GMT, the AUD/USD is trading .7427, up 0.0002 or +0.04% and the NZD/USD is at .6772, up 0.0005 or +0.09%.

Increased demand for higher risk assets are helping to underpin the Aussie and Kiwi, however, firmer U.S. Treasury yields may be capping gains.

Longer-term, the Australian and New Zealand Dollars are bearish because of the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia and the dovish Reserve Bank of New Zealand.

The short-term rally we are experiencing is likely being fueled by traders adjusting positions on concerns a prolonged trade war between the United States and China may force the Fed to alter its plans for as many as two more rate hikes later this year.

Forecast

Look for the return of volatility at 0200 GMT when China releases its economic reports. GDP is expected to come in at 6.7%, down slightly from 6.8%. Fixed Asset Investment is expected to come in at 6.0%, down slightly from 6.1%.

Industrial Production is estimated to have risen 6.5%, down from 6.8%. Retail Sales are expected to come in at 8.8%, up from 8.5%. Last month’s Unemployment Rate was 4.8%.

At 1230 GMT, the U.S. is scheduled to release reports on Core Retail Sales, Retail Sales and Empire State Manufacturing Index. At 1400 GMT, Look for a report on Business Inventories.

Core Retail Sales are expected to rise 0.4%, down from 0.9%. Retail Sales are estimated at 0.4%, down from 0.8%. The Empire State Manufacturing Index is expected to come in at 20.3, down from 25.0. Business Inventories are expected to increase 0.4%, up from 0.3%.

Stronger-than-expected retail sales data should be bearish for the AUD/USD and NZD/USD. The Aussie and Kiwi could be underpinned by weak retail sales.

Trading could be light on Monday and Tuesday ahead of Fed Chair Jerome Powell’s testimony before Congress on Wednesday and Thursday.