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James Hyerczyk

Lower demand for risky assets weighed on the Australian and New Zealand Dollars early last week with investors apparently already moving on from the optimism of the U.S.-China trade deal announcement on December 13. Concerns that the wild fires in the Australian bush lands would hurt the economy and lead to another rate cut by the Reserve Bank of Australia also weighed on prices.

Last week, the AUD/USD settled at .6900, down 0.0045 or -0.65% and the NZD/USD finished at .6635, down 0.0028 or -0.42%.

There were no major economic releases out of New Zealand last week. In Australia, Building Approvals came in higher than expected. The Trade Balance and Retail Sales were also better than the estimates.

Both the Aussie and the Kiwi were boosted by a disappointing U.S. jobs report on Friday.

Australian Economic News

The number of dwellings approved in Australia increased by 11.8 percent month-over-month in November 2019, easily beating market expectations of a 2 percent gain and after a revised 7.9 percent fall in the previous month.

Australia’s trade surplus widened to AUD 5.80 billion in November 2019 from a downwardly revised AUD 4.08 billion in the previous month and above market consensus of AUD 4.15 billion. Exports rose 2 percent while imports dropped 3 percent.

Considering the first eleven months of the year, trade surplus surged to AUD 63.26 billion from AUD 19.21 billion in the corresponding period of the prior year.

Retail Sales in Australia rose by 0.9 percent month-over-month in November 2019, easily beating market forecasts of 0.4 percent and after an upwardly revised 0.1 percent gain in the previous month.

This marked the steepest increase in retail trade since November 2017, lifted by Black Friday sales.

Retail Sales MoM in Australia averaged 0.47 percent from 1982 until 2019, reaching an all-time high of 8.10 percent in June of 2000 and a record low of -10.60 percent in July of 2000.


Weekly Forecast

This week’s major reports include New Zealand’s NZIER Business Confidence and China’s quarterly GDP. In the U.S., investors will get the opportunity to react to the latest data on Consumer Inflation and Retail Sales.

For much of last week, speculators were increasingly betting that bushfires will hurt Australia’s economy. The damage is likely to run into the billions with spending and tourism expected to take a hit.

Traders were betting the fires would spur the Reserve Bank of Australia (RBA) to cut interest rates to support already sluggish growth.

The fires are the wildcard this week that could drive the Australian Dollar lower.

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