AUD/USD and NZD/USD Fundamental Weekly Forecast – Demand for Higher-Yielding, Higher-Risk Assets Providing Support

The Australian and New Zealand Dollars finished higher last week on well-below average holiday volume as risk appetite grew stronger amid trade optimism as investors awaited details on Phase One of the U.S.-China trade deal reached mid-month. Demand for the Aussie and Kiwi increased after President Trump said the U.S. and China would hold a trade deal signing ceremony.

Last week, the AUD/USD settled at .6985, up 0.0084 or +1.22% and the NZD/USD finished at .6704, up 0.0101 or 1.53%.

Besides increased appetite for higher-yielding, higher-risk currencies, a plunge in the U.S. Dollar also drove the Aussie and Kiwi higher. The greenback plummeted as optimism about the outlook for a U.S.-China trade deal sapped safe-haven demand for the U.S. currency. Dollar traders are aggressively lifting hedges placed throughout the year.

U.S.-China News

The two economic powerhouses kept news to a minimum last week. Although some investors are concerned over the lack of details from the trade deal as well as uncertainly over when or where it will be signed, the worries weren’t strong enough to encourage investors to seek protection in the Japanese Yen. Furthermore, Washington and Beijing said the delay could be attributed to translation issues.

Beijing said on Wednesday it is in close touch with Washington on a trade deal signing ceremony, a day after U.S. President Donald Trump said he and Chinese President Xi Jinping will have a ceremony to sign the recently struck agreement.

Trump’s comment that a trade agreement is ‘done,’ basically underpinned the AUD/USD and NZD/USD all week.

U.S. Economic Data

Last week’s U.S. economic news was mostly disappointing but traders took it in stride.

Core Durable Goods and Durable Goods Orders came in below expectations. New Home Sales also missed their mark as well as the Richmond Manufacturing Index. Weekly Unemployment Claims matched expectations.

Weekly Forecast

Trading volume is expected to come in on the light side as the holiday trade continues this week. However, with Tuesday and Wednesday the only bank holidays, it should come in higher than last week.

There are no major economic releases from Australia and New Zealand this week. The major U.S. economic developments include Chicago PMI on Monday, the Conference Board Consumer Confidence report on Tuesday, the ISM Manufacturing PMI report and the FOMC Meeting Minutes on Friday.

Fed speakers will hit the circuit on Friday along with the ISM Manufacturing PMI report and the FOMC Meeting Minutes, raising the chances of heightened volatility.