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AUD/USD and NZD/USD Fundamental Weekly Forecast – RBA Minutes Likely to Support July Rate Cut

By:
James Hyerczyk
Updated: Jun 17, 2019, 02:38 UTC

Early Tuesday, the RBA will release its Monetary Policy Meeting Minutes. The minutes are expected to show policymakers are supporting a July rate cut. On Wednesday, the U.S. Federal Reserve is expected to leave its benchmark interest rate unchanged at 2.50%, but could issue a dovish monetary policy, Early Thursday, all eyes will be on the New Zealand Gross Domestic Product report. Last quarter, it came in at 0.6%. The data is not expected to prevent another rate cut by the RBNZ. 

AUD/USD and NZD/USD

The Australian and New Zealand Dollars finished sharply lower last week after the prior week’s short-covering rally fizzled and investors renewed their selling pressure on forecasts for additional rate cuts by the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ). Weak domestic data contributed to the pressure on the Aussie and the Kiwi, while mixed U.S. economic data helped boost the U.S. Dollar.

Last week, the AUD/USD settled at .6872, down 0.0131 or -1.87% and the NZD/USD closed at .6492, down 0.0172 or -2.59%.

There were no major reports from New Zealand, but Manufacturing Sales came in better than expected. These results were offset, however, by a 3.1% decline in Visitor Arrivals and the weak Business NZ Manufacturing Index.

In Australia, Westpac Consumer Sentiment disappointed with a reading of -0.6%, down from 0.6% last month. More importantly, the Employment Change report showed the economy added 42.3K jobs in May, however, the Unemployment Rate was 5.2%, higher than the 5.1% forecast. This news likely solidified another rate cut by the RBA, perhaps as early as July.

In the U.S., Core PPI was steady, but Core CPI was lower than expected at 0.1% versus 0.2%. Weekly Unemployment Claims rose to 222K, above the 215K forecast. Core Retail Sales were 0.5%, meeting the estimate. The previous month was revised higher to 0.5%. Retail Sales rose 0.5%, lower than the 0.7% forecast. However, the previous month was revised higher to 0.3%. Industrial Production also came in higher than expected at 0.4%.

Weekly Forecast

Early Tuesday, the RBA will release its Monetary Policy Meeting Minutes. The minutes are expected to show policymakers are supporting a July rate cut.

On Wednesday, the U.S. Federal Reserve is expected to leave its benchmark interest rate unchanged at 2.50%, but could issue a dovish monetary policy statement, which hints at a rate cut in July. Investors will be looking for clues for an easing of monetary policy later this year. Traders are now pricing in a more than 80% chance of a rate cut in July and 70% probability of another reduction in September, according to the CME Group’s Fed Watch tool.

Early Thursday, all eyes will be on the New Zealand Gross Domestic Product report. Last quarter, it came in at 0.6%. The data is not expected to prevent another rate cut by the RBNZ.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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