AUD/USD and NZD/USD Fundamental Weekly Forecast – Investors Will Be Watching New Zealand CPI Report

Demand for higher risk assets, firm commodity prices and stronger-than-expected employment data helped drive the Australian Dollar to its highest level since September 20.

The AUD/USD finished the week at .7982, up 0.0071 or +0.90%.

Australia’s Employment Change report came in better-than-expected. Australia’s economy created 34,700 new jobs during December, according to Australian Bureau of Statistics data, which was well-above the economist consensus of 13,200 new jobs. The Australian unemployment rate rose from 5.4% to 5.5%, although traders said this was nothing to be concerned about.

After spiking to the upside early in the week, the New Zealand Dollar spend most of the week trading sideways. The currency continued to be underpinned by demand for higher risk assets. However, the lack of fresh domestic news helped hold the currency in a range.

The NZD/USD settled the week at .7274, up 0.0029 or +0.40%.

There were no major reports last week, but minor reports included the Food Price Index, NZIER Business Confidence, GDT Price Index, ANZ Commodity Prices and Business NZ Manufacturing Index.

The FPI came in lower than expected as well as the NZIER Business Confidence report. Other reports that disappointed were the ANZ Commodity Prices and the Business NZ Manufacturing Index.

The best news was the increase in the GDT Price Index. It came in at 4.9%, better than the previous 2.2%.

Forecast

Data will be scarce from Australia this week. On-tap this week are the MI Leading Index and CB Leading Index. Thursday is a bank holiday.

The major report for the week is the New Zealand CPI report. Quarterly New Zealand consumer inflation is expected to come in at 0.4%, down from the previously reported 0.5%. This report could make or break the current uptrend.

The big story of the week is likely to be the U.S. government shutdown. Current information suggests the shutdown may last all week or even longer. The response to this issue is hard to predict. At first you may notice the lack of government reports. Secondly, if demand for higher risk assets declines then look for money to flow into the lower-risk Japanese Yen and gold markets. These markets will be perceived as safe havens.

Since the Aussie and Kiwi rallies have been driven by demand for risky assets, they may retreat if U.S. stock prices tumble. Furthermore, lower demand for commodities could hurt these currencies. There are no major reports from China this week.

In the U.S., the major reports are Advance GDP and Durable Goods on Friday. Next week, the Federal Reserve meets to discuss monetary policy.