AUD/USD and NZD/USD Fundamental Weekly Forecast – Dovish RBA Minutes Already Priced In; Focus on Fed Powell’s Speech on Friday

The Reserve Bank of Australia Monetary Policy Meeting Minutes will be featured on Tuesday. Traders will be looking for clues that could help them determine the frequency of future rate cuts by policymakers.
James Hyerczyk

The Australian and New Zealand Dollars finished lower last week, with the Kiwi absorbing most of the losses. The lack of progress in U.S.-China trade talks continued to keep a lid on prices as well as fear of a global recession. Excessive volatility in the global bond market also fueled a choppy, two-sided trade. With investors in both the Aussie and the Kiwi expecting more rate cuts by their respective central banks, it’s going to be hard to mount a meaningful rally although the recent price action suggests the currencies may be ripe for a counter-trend rally.

Last week, the AUD/USD settled at .6783, down 0.0005 or -0.07% and the NZD/USD closed at .6425, down 0.0041 or -0.63%.

New Zealand Dollar

There wasn’t much movement in the NZD/USD last week with the Forex pair posting an inside move, following the previous week’s extremely wide range. The shock of the unexpected 50-basis point rate cut by the Reserve Bank of New Zealand (RBNZ) continues to influence the price action with buyers reluctant to go against the down trend.

Australian Dollar

The AUD/USD performed relatively well last week, helped by an unexpected jump in the Employment Change report. The overall labor situation looked rosier than expected with the Wage Price Index coming in at 0.6%, better than the 0.5% forecast. The Employment Change report showed the economy added 41.1K jobs in July versus a 14.2K estimate. The Unemployment Rate held steady at 5.2%.

Gains were limited last week by a dovish speech from the Reserve Bank of Australia’s (RBA) No. 2 official, Deputy Guy Debelle. He said global firms’ are unlikely to maintain their strong hiring while they stall investment amid the U.S.-China confrontation, pushing the world into an avoidable slump.

Debelle further warned that while Australia is currently benefiting from Beijing’s domestic stimulus, it too will eventually suffer from the trade war fallout.

“In the end, the decision to build or not build that new factory needs to be taken,” Debelle said in the text of a speech in Sydney on August 15. “The longer businesses hold off, the weaker demand will be, which will further confirm the decision to wait. That runs the risk of a self-fulfilling downturn.”

Weekly Forecast

New Zealand Dollar traders will have the chance to reaction to a Retail Sales report on Friday. It is expected to come in at 0.1%, below the previous quarter’s 0.7% increase.

The Reserve Bank of Australia Monetary Policy Meeting Minutes will be featured on Tuesday. Traders will be looking for clues that could help them determine the frequency of future rate cuts by policymakers.

Going into the August RBA meeting, there was a 44% chance of a 25-basis point rate cut in September. After the August RBA meeting on August 6, there was a 47% chance of a 25-basis point rate cut. At the end of last week, there was a 77% chance of no change in rates at the September RBA meeting.

We expect the RBA minutes to come in dovish, but any selling pressure is likely to be short-lived because of the drop in the chances of a September rate cut. Many are saying that President Trump’s announcement of a delay in new tariffs on China has caused traders to ease up on expectations of aggressive rate cuts by the central bank.

On Friday, all eyes will be on a speech by Fed Chair Jerome Powell at the Jackson Hole Symposium. Powell has to talk about the wild swings in the stock market and the Treasury yield curve inversion. He is also going to have to say the Fed is prepared to act aggressively if needed to prevent a global recession from spreading to the United States. He has to deliver a “tough-talk” speech or he could trigger a volatile response in the global equity and global bond markets.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.