AUD/USD and NZD/USD Fundamental Weekly Forecast – Release of RBA, Fed Statements Should Confirm Policy Differences

The Australian and New Zealand Dollars tumbled against the U.S. Dollar last week as the spread between U.S. Treasury yields and Government Bonds widened. The contrast between the monetary policies of the U.S. Federal Reserve and the Reserve Bank of Australia and Reserve Bank of New Zealand also weighed on the currencies. The Fed is likely to raise rates two or three times this year while the RBA and RBNZ seem to be in no hurry to raise rates.

The AUD/USD settled at .7579, down 0.0090 or -1.17% and the NZD/USD settled at .7084, down 0.0121 or -1.67%.

In Australia, a report showed that Australian inflation offered mixed results. Consumer inflation came in below expectations at 0.4% versus a 0.5% estimate and 0.6% previous read. Trimmed Mean CPI was 0.5%. If matched the forecast, while coming in better than the previous quarter.

In New Zealand, the New Zealand trade balance came in at -86 million. Traders were looking for a 270 million increase. The previous month was revised down to 172 million.

Forecast

The same factors that drove the Aussie and Kiwi sharply lower will continue to influence the market this week. They include rising Treasury yields, a firmer U.S. Dollar and the easing of geopolitical uncertainty.

With the new month comes fresh U.S. economic data that could influence Fed policy. Any reports that show rising inflation will be especially bearish on the Aussie and Kiwi if they trigger another spike in U.S. Treasury yields.

The major reports this week include ISM Manufacturing PMI, ISM Non-Manufacturing PMI and the U.S. Non-Farm Payrolls report.

The U.S. Federal Reserve will also release its latest interest rate decision and monetary policy statement. It is not expected to raise rates at this meeting, but widely expected to do so in June. In its monetary policy statement it could offer hints as to whether it expects to raise rates two or three more times this year.

Several events that could influence the price action will also take place in Australia and New Zealand.

In Australia, RBA Governor Philip Lowe will give a speech on Monday. Early Tuesday features the RBA Rate Statement. Australia will release its latest data on Trade Balance early Thursday. Early Friday, the RBA will release its Monetary Policy Statement.

In New Zealand, traders will get to react to the latest ANZ Business Confidence report early Monday. The major reports will be quarterly employment change and unemployment rate. They will be released early Wednesday, local time.