AUD/USD and NZD/USD Fundamental Weekly Forecast – U.S. Inflation Data, Demand for Risk Control Will Impact Trade

The Australian and New Zealand Dollars posted two-sided trades last week before finishing mixed in response to concerns over the escalating tensions between China and the United States. Traders also responded to economic events in the U.S., Australia and New Zealand, but for the most part, reacted to the news events with low confidence. This price swings suggested investor indecision and impending volatility.

To recap the week:

The week started with China’s finance ministry announcing it would impose retaliatory tariffs on U.S. goods, and ended with President Trump instructing the United States Trade Representative to consider $100 billion in additional tariffs against China. Additionally, China’s Commerce Ministry said the country will not hesitate to react with a “major response” to new tariffs from the U.S.

In other news, the Bureau of Labor Statistics reported on Friday that non-farm payrolls rose 103,000 in March while the unemployment rate was 4.1 percent.  Economists and traders were looking for a payrolls gain of 193,000 and the unemployment rate to decline one-tenth of a point to 4 percent. The closely watched average hourly earnings figure rose 0.3 percent against estimates of 0.2 percent. This pushed up the annual rate to 2.7 percent.

In Australia, the Reserve Bank of Australia left its benchmark interest rate at historically low levels as expected. It also expressed concerns over low inflation, rising housing prices and low wages.

The AUD/USD settled at .7671, down 0.0005 or -0.07%.

Additionally, Australian retail sales surprisingly rose 0.6%, beating the 0.3% estimate. The previous number was also revised higher. The Trade Balance also came in better than expected, however, the previous month was revised lower.

In New Zealand, the New Zealand Dollar rallied to its highest level since March 14 last week, helped by a pickup in consumer confidence, a bigger-than-expected budget surplus and rising property values.

The NZD/USD settled at .7269, up 0.0038 or +0.53%.

Recent indicators have painted a rosy picture of the NZ economy. Consumer confidence rose last month, according to the ANZ consumer confidence index, while the government’s operating surplus for the first eight months of the year, at $2.85 billion, topped the Treasury’s December forecast of $2.36 billion.

Additionally, the average value of a New Zealand home rose 7.3 percent in the year to March, its biggest gain in nine months. Although daily prices fell at last week’s Global Dairy Trade auction, New Zealand’s biggest product, whole milk powder, gained.

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Forecast

This week’s price action is expected to continue to be impacted by the ongoing dispute between China and the United States. Broadly considering the impact of a trade war between the two major economies, export-sensitive currencies like the Aussie and Kiwi are likely to attract selling pressure. We’ll also get a further reaction from demand for higher-risk assets.

The wildcard event that will move the markets will be the announcement of the start of formal negotiations between the United States and China to end the trade war. Traders will also get the opportunity to react to U.S. consumer and producer inflation as well as the Federal Open Market Committee minutes from its March meeting.