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James Hyerczyk

The Australian and New Zealand Dollars are trading lower Thursday on light volume ahead of the release of the Australian Employment Change and Unemployment Change reports at 01:30 GMT. If yesterday’s volatile price action is any indication then these reports could trigger some wild swings in both currencies, but especially the Aussie Dollar.

At 00:41 GMT, the AUD/USD is trading .7171, down 0.0009 or -0.13% and the NZD/USD is at .6723, down 0.0003 or -0.05%.

Wednesday’s trade was dominated by three headline events:  Weaker-than-expected New Zealand consumer inflation data, better-than-expected Chinese economic data and a surprise announcement by the New Zealand government.

New Zealand Dollar

The NZD/USD broke sharply on Wednesday in reaction to weaker-than-expected U.S. consumer inflation data that likely solidified the chances of a rate cut by the Reserve Bank of New Zealand (RBNZ) as early as May. As reported by Statistics New Zealand, consumer inflation for the March quarter came in at 0.1 percent, below market guesses of 0.3 percent and the RBNZ’s 0.2 percent forecast. That number dragged the annual inflation rate to 1.5 percent, below the central bank’s 2 percent target.

After the initial reaction to the CPI news drove the Kiwi to its lowest level since January 3, the NZD/USD began to rebound after the release of better than expected economic data from China.

The data from China showed its economy grew at a 6.4 percent annual pace in the first quarter, above expectations for a 6.3 percent growth rate. Industrial Production in China also beat the forecast with an 8.5 percent gain, while retail sales grew more than expected at 8.4 percent.

The Kiwi was further boosted after Prime Minister Jacinda Ardern said the public has spoken and she won’t introduce a capital gains tax while she leads the Labor Party.


Australian Dollar

The AUD/USD rose sharply early in the session on the back of the Chinese data, but prices collapsed late in the session to erase most of those earlier gains on profit-taking and position-squaring ahead of the release of today’s very important Australian jobs data.

February’s employment report was mixed and in this week’s Reserve Bank of Australia minutes, the central bank didn’t sound too excited about the upcoming report. In the minutes, the RBA said that an uptrend in the unemployment rate would open the door to a rate cut.

Traders are looking for the Employment Change to show the economy added 15.2K jobs in March while the Unemployment Rate is expected to increase slightly from 4.9% to 5.0%.

The AUD/USD is likely to break sharply if the jobs report is bearish since this will increase the chances of a rate cut by the RBA. Traders are currently betting on an August rate cut by the central bank.

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