Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
James Hyerczyk

The Australian and New Zealand Dollars finished higher last week with both currencies supported by renewed optimism over U.S.-China trade relations. The Aussie, however, underperformed the Kiwi, with sellers motivated by dovish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe and expectations of a rate cut by the central bank on October 1. The Kiwi was underpinned by a less-dovish than expected monetary policy statement by the Reserve Bank of New Zealand (RBNZ).

Last week, the AUD/USD settled at .6765, up 0.0001 or +0.02% and the NZD/USD closed at .6296, up 0.0037 or +0.60%.

Australian Dollar

Last week, the Aussie weakened after Governor Philip Lowe signaled further cuts to interest rates as early as this week to keep ahead of falling global rates while urging the nation’s businesses to use the abundance of cheap money to expand and hire more staff.

Speaking in the NSW Northern Tablelands town of Armidale on Tuesday night, Dr. Lowe said even though the national economy was now at a “gentle turning point”, there were still local and international risks and too many Australians were without a job or wanted more working hours.

Lowe acknowledged the RBA would have a difficult time trying to fight the trend in what appears to be a structural decline in global interest rates.

“We live in an interconnected world, which means that we cannot completely insulate ourselves from long-lasting shifts in global interest rate,” he said. “Our floating exchange rates give us a degree of monetary independence, but we can’t ignore structural shifts in global interest rates.

If we did seek to ignore these shifts, our exchange rate would appreciate, which, in the current environment, would be unhelpful in terms of achieving both the inflation target and full employment.”


New Zealand Dollar

Last week, the RBNZ held its Official Cash Rate at 1 percent, as had been widely expected by analysts. This followed August’s surprise 50-basis point rate cut. In its, monetary policy statement, central bank policymakers said they did “not warrant a significant change to the monetary policy outlook.

Weekly Forecast

The Reserve Bank of Australia is expected to cut its benchmark interest rate 25-basis points on October 1 from 1.00% to 0.75%, however, there are still some who don’t believe they will. This is based on overnight-index-swap rates which imply an October 1 cash rate of 0.80%. This is above the 0.75% rate expected after the rate cut.

Ahead of the decision, index provider ASX says the probability of a quarter-point rate cut is about 80%. This is up from 25% on September.

Another rate cut could drive the AUD/USD even lower since not everyone is convinced the RBA will make the move and have not fully priced in one.

In New Zealand, traders will get the opportunity to react to the ANZ Business Confidence report and the NZIER Business Confidence report.

If these reports show improvement then this will not support the case for a rate cut by the RBNZ in November. This could underpin the NZD/USD.

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

Trade With A Regulated Broker

  • Your capital is at risk
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.