AUD/USD and NZD/USD Fundamental Weekly Forecast – Prices Could Stabilize with Focus on US Inflation Data

The Australian and New Zealand Dollars finished lower last week. The Aussie was the weaker of the two with the currency getting hit by a combination of a dovish domestic central bank and generally weak global yields after the U.S. Federal Reserve and the Bank of England sounded the dovish alarm.

Last week, the AUD/USD settled at .7403, down 0.0118 or -1.58% and the NZD/USD closed at .7120, down 0.0051 or -0.71%.

The New Zealand Dollar was also driven lower by the overall weakness in global yields, but there was also speculation the Reserve Bank of New Zealand, a noted hawk after last month’s rate hike, would refrain from lifting rates at its November 24 policy meeting.

Aussie Drops as RBA Sounds Dovish Tone

The Australian Dollar started its sell-off early last week after the Reserve Bank (RBA) sounded a more dovish tone than expected.

The RBA stressed that inflation was still too low, although it also omitted its previous projection that rates were unlikely to rise until 2024 and dropped a key target for the April 2024 government bond.

Analysts said the message was still more hawkish than previous RBA meetings, even if not as hawkish as markets had anticipated.

In its quarterly round up of the economy, the RBA trimmed its forecast for gross domestic product (GDP) for this year to 3%, from 4%. But it boosted 2022 by more than a percentage point to 5.5%.

New Zealand Economic News

New Zealand’s jobless rate fell to an equal record low in the third quarter, beating expectations and sending the Kiwi dollar higher as markets bet the data will prompt a further hike in interest rates later this month.

The unemployment rate fell to 3.4% in the quarter ending September, Statistics New Zealand data showed, far lower than a forecast of 3.9% by economists polled by Reuters.

Wage growth was strong in the quarter with the private sector labor cost index (LCI) recording a 0.7% lift, though just below a forecast 0.8% increase.

The seasonally adjusted employment jumped 2.0% in the quarter, beating forecasts of a 0.4% increase. The participation rate rose to 71.2%, higher than the 70.6% forecast.

Weekly Outlook

There are no major releases from New Zealand this week, but Australian traders will be focusing on the Employment Change and Unemployment Rate reports. The Employment Change is expected to show the economy added 50K and the Unemployment Rate is expected to rise from 4.6% to 4.8%.

The rest of the week, the Aussie and Kiwi will be influenced by the movement in the U.S. Dollar, which is expected to be manipulated by a number of Federal Reserve speakers, including Chairman Jerome Powell, and monthly reports on Producer and Consumer inflation.

With the central bank decision out of the way until the RBNZ meets on November 24, the AUD/USD and NZD/USD could stabilize this week.

The short-term risk for the Aussie is skewed to the upside due to the gap between the Australian Dollar and Australian interest rates.