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

The Australian and New Zealand Dollars finished higher last week, helped by a weaker U.S. Dollar which tumbled amid hopes for a new U.S. stimulus package. Negotiations between Republicans and Democrats continued all week but they were unable to reach a compromise deal by the end of the week. Earlier in the week, both currencies tested major support that if broken would have done severe damage to the daily and weekly charts.

Last week, the Australian Dollar settled at .7136, up 0.0059 or +0.84% and the New Zealand Dollar finished at .6691, up 0.0086 or +1.31%.

Know where the Market is headed? Take advantage now with 

75% of retail CFD investors lose money

The Aussie and Kiwi owed most of their rally to the plunging greenback than any domestic activity, with the Australian Dollar still vulnerable to further policy easing from the Reserve Bank of Australia (RBA) at its November 3 meeting and the New Zealand Dollar feeling the pressure of continued talk of negative interest rates next year by the Reserve Bank of New Zealand policymakers.

RBA Minutes Showed Policymakers Talked About Further Monetary Easing

The Reserve Bank of Australia (RBA) discussed the possibility of further monetary easing at its October board meeting, including cutting the cash rate towards zero and buying longer-dated government bonds, minutes of its most recent meeting showed last Tuesday.

RBA board members noted larger balance sheet expansions by other central banks had led to lower sovereign yields in most other rich nations, minutes of the October 6 meeting showed.

Board members also discussed implications for the exchange rate, providing the clearest sign yet the RBA will likely soon cut rates further and expand its massive bond buying campaign, to lower both borrowing costs and the local dollar.

Ahead of the minutes, RBA Assistant Governor Chris Kent said one of the monetary tools for the board was to buy bonds further out the yield curve.

“Those purchases further out could occur on a regular basis…and the intention there is to bring down the longer end of the yield curve that would reduce funding costs,” Kent sent in reply to a Reuters query at an event in Sydney.

“It will also probably have some additional portfolio balancing effects, including on the exchange rate.”


Weekly Forecast

The fiscal stimulus talks are a wildcard at this point. Deadlines have been set, passed and reset again. I believe the stimulus aid will eventually be approved, but the timing is unknown at this point. Furthermore, the focus for traders could shift from stimulus to the U.S. presidential election coming up on November 3.

Australia will report quarterly CPI data on Wednesday. It is expected to have improved from -1.9% to 1.5%. Trimmed Mean CPI is expected to have improved from -0.1% to 0.3%.

Some investors will also be looking ahead to the November 3 RBA meeting. The RBA has held its cash rate at a record low 0.25% since can emergency 50 basis points (bps) cut in mid-March. However, economists widely predict the RBA will trim the rate at its November 3 policy meeting by 15 bps to 0.1%. This move, coupled with the buying of bonds further out the yield curve should be enough to keep the pressure on the Aussie Dollar.

Buying long-dated bonds is one way that central bank policymakers would reduce funding costs.

For a look at all of today’s economic events, check out our economic calendar.
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.