AUD/USD and NZD/USD Fundamental Weekly Forecast – Traders Hoping Aussie Government Leaves Spending Tap Open

The Australian and New Zealand Dollars hit multi-month highs last week, supported by surging commodity prices and a plunge in U.S. Treasury yields, following the release of a weaker-than-expected U.S. employment report that likely dampened the possibility of an earlier tightening by the U.S. Federal Reserve.

Last week, the AUD/USD settled at .7844, up 0.0133 or 1.72% and the NZD/USD finished at .7283, up 0.0120 or 1.68%.

The early support for the Aussie last week was provided by a sharp rise in prices of Australia’s top export earner, iron ore. According to Reuters, futures of the key steel making ingredient vaulted to a record high last Friday pushing spot prices to the highest-ever above $200 a tonne.

Reuters also reported the antipodean currencies, traded as a liquid proxy for the Chinese yuan, were also boosted by impressive trade data from China which showed import growth hitting a decade high. China’s imports of iron ore are up 6.7% this year so far while those of natural gas has surged more than 22%. Both commodities are Australia’s top export earners.

Earlier in the week, the Reserve Bank of Australia (RBA) upgraded forecasts for the country’s economy, though inflation and wages growth are seen lagging in a sign monetary policy will remain highly accommodative for years to come.

This Week’s Outlook

Australia’s government will release its 2021/22 budget outlook on Tuesday where it will unveil a record deficit but is still likely to keep its spending tap open to help support jobs and growth.

Out of Australia, economic reports include retail sales, NAB Business Confidence and MI Inflation Expectations. New Zealand will offer up data on FPI and BusinessNZ Manufacturing.

Stateside, the key reports are Tuesday’s JOLTS Job Openings, a favorite of the Fed. The Consumer Price Index will be released on Wednesday and on Thursday, data on Retail Sales.

A jump in the consumer price index could make traders forget about Friday’s disappointing U.S. Non-Farm Payrolls report.

Traders will also get to hear the reactions to Friday’s jobs report from several Federal Open Market Committee (FOMC) members.