AUD/USD and NZD/USD Fundamental Daily Forecast – Australian Dollar May Benefit from Qatar Dispute

Both the Australian and New Zealand Dollars drifted higher on Monday with the AUD/USD posting a volatile trade. Both Forex pairs showed an upside bias and a continuation of the momentum from Friday, created by the disappointing U.S. Non-Farm Payrolls report.

The recent trade in the AUD/USD and NZD/USD suggests that investors have accepted the widely expected Fed rate hike in June, and are currently pricing in the strong possibility of a limited amount of Fed rate hikes later in the year.

Last December, the Fed boldly forecast the possibility of three rate hikes in 2017. However, the recent slowdown in the labor market and the sluggish inflation numbers suggest the Fed may not be able to fulfill its forecast. Some investors are saying that after the June rate hike, the Fed may not raise interest rates until December.

Built in to the forecasts of higher interest rates by the Fed was speculation that President Trump’s aggressive economic stimulus package would help grow the jobs market and increase inflation. Higher rates would’ve helped boost the U.S. Dollar.

However, in Monday, a report surfaced that said economists don’t expect tax reform or an infrastructure spending boost to happen this year. This may be another reason why the Aussie and Kiwi are trading higher.

The Australian Dollar may have also received a boost after six Arab countries including Saudi Arabia and Egypt cut diplomatic ties with Qatar after accusing the sovereign nation of destabilizing the region by supporting terrorism.

Qatar is a major natural gas producer and exporter. A disruption to Qatar’s business could become a major benefit for Australia which is also becoming a major natural gas player in its own right. According to the Australian Department of Foreign Affairs and Trade, natural gas is Australia’s third-largest export product after iron ore and coal.

The NZD/USD traded firm on Monday, but the price action was limited due to a bank holiday in New Zealand.