AUD/USD and NZD/USD Fundamental Daily Forecast – Higher on Position-Squaring in Lackluster Trade

The AUD/USD and NZD/USD are rebounding after a week’s worth of selling pressure. There were no major economic events on Tuesday so the price action is likely related to some light profit-taking and position-squaring ahead of Thursday’s Reserve Bank of New Zealand interest rate statement and monetary policy statement.

In economic news, the National Australia Bank Business Confidence report came in at 12, but the previous month’s result was reduced to 8.

According to the NAB, business conditions in July have risen to their highest levels since early-2008, which appears to have boosted business confidence as well.

The NAB also, “Business confidence has gradually been chasing business conditions higher for some time, and has likely seen some additional support this year from an improving global environment as well, although there are still some notable risks.”

The bank is also “optimistic” about the near-term outlook for the labor market. “The persistent strength in employment conditions has made us a little more optimistic about the near-term outlook for the labor market.”

New Zealand Dollar

On Wednesday, the Reserve Bank of New Zealand (RBNZ) will meet to announce its latest interest rate decision. The RBNZ is expected to hold interest rates steady at 1.75%. It is also expected to stick to a neutral bias. Furthermore, it will be Graeme Wheeler’s final OCR decision as RBNZ Governor.

Many analysts doubt that Wheeler will shake up the market at all with his tone. The RBNZ’s accompanying statement, projections and press confidence is expected to reinforce the central bank’s cautious, watchful and neutral stance.

In the U.S. today, traders will get the opportunity to react to the latest data from the JOLTS Job Openings report and the IBD/TIPP Economic Optimism report. I don’t expect to see much of a reaction.

The primary market moving event this week remains the U.S. consumer inflation report. U.S. CPI is expected to show a 0.2% increase, up from 0.0%. The Core CPI is expected to also rise 0.2%, up slightly from 0.1%.

If the CPI data comes in as expected then look for traders to put a 50/50 chance on a rate hike in December. Higher inflation numbers will increase those odds. Lower inflation data will decrease the chance of a rate hike.