AUD/USD and NZD/USD Fundamental Daily Forecast – Getting Boost from Thin-Trading Conditions

Both the Australian and New Zealand Dollars are recovering from early weakness that was fueled by a knee-jerk reaction to the news that North Korea had tested a nuclear weapon. Investors had the mindset to sell higher-yielding assets on the opening, but the market quickly rebounded after they decided the North Korean event posed no threat to the financial markets.

At 0438 GMT, the AUD/USD is trading .7961, down 0.0005 or -0.06%, up from a low of .7941. The NZD/USD is trading .7172, up 0.0019 or +0.26%, up from a low of .7135.

There were no major reports from Australia or New Zealand overnight. Minor reports included MI Inflation Gauge which came in at 0.1%, the same as the previous month. Company Operating Profits fell 4.5%, more than the -3.9% estimate. The ANZ Job Advertisements report rose 2.0%, up from the previous 1.6%.

The focus this week for investors will be the Reserve Bank of Australia interest rate decision, RBA Rate Statement and a speech from RBA Governor Philip Lowe.

The RBA is expected to keep rates at 1.50% while maintaining its long-held neutral stance. It has kept its benchmark cash rate on hold for a 13^th straight month.

In mid-August, RBA governor Philip Lowe gave financial markets pretty clear guidance, saying assumptions in markets of an ongoing policy pause were about right.

“I think that they are reasonable assumptions, that the next move will be up, rather than down, but it will not be for some time,” Mr. Lowe said.

One day after the RBA decision, investors will get the opportunity to react to the latest quarterly GDP figures. Economists are expecting a solid quarter, with activity bouncing back after a storm affected the first quarter.

Although the NZD/USD is up slightly early Monday, this move is likely to be short-lived and is likely the result of the thin trading conditions. Downside pressure could resume later this week. The current selling pressure is being attributed to last week’s negative comments from Reserve Bank of New Zealand Graeme Wheeler. He said the currency needs to be lower in order to grow exports.