AUD/USD and NZD/USD Fundamental Daily Forecast – Investors Dumping Overvalued Currencies

Australian and New Zealand Dollars are trading lower on Thursday with investors concerned over the value of the currencies.

At 1517 GMT, the AUD/USD is trading at .7889, down 0.0010 or -0.13% and the NZD/USD is trading at .7142, down 0.0027 or -0.37%.

Some of the selling was attributed to U.S. economic data which suggested the economy may be improving enough for the Fed to consider a rate hike later in the year. Yesterday’s GDP data was supportive enough to drive up the chances of a Fed rate hike from 34% earlier in the week to 41%.

Today’s U.S. economic reports were mixed. On the bearish side, the Challenger Job Cuts report surprisingly rose 5.1%, up from last month’s -37.6% reading.

The Core PCE Price Index, the Fed’s favorite inflation indicator, came in at 0.1%, the same as the estimate. This put annual inflation at 1.4%, well below the Fed’s 2.0% target.

Personal Spending was below the 0.4% forecast, coming in at 0.3%.

On the plus side, Weekly Unemployment Claims were slightly lower than expected at 236K. Personal Income rose 0.4%, higher than the 0.3% estimate and Chicago PMI was slightly better than the forecast at 58.9, the same as last month’s reading.

The news that hurt the U.S. Dollar was a 0.8% drop in Pending Home Sales. Traders were looking for an increase of 0.4%. Last month’s report was revised lower to 1.3%. The lack of inventory was blamed for the decline.

Helping to pressure the Aussie and the Kiwi were concerns over overpriced currencies. Reserve Bank of New Zealand Governor Graeme Wheeler said the economy would improve if the currency was lower.

Australian and New Zealand Dollar traders were also watching the Euro because its traders were selling the currency on growing speculation that European Central Bank President Mario Draghi was not happy with the soaring value of the single-currency.

It looks as if the biggest worry for AUD/UD and NZD/USD traders at this time is valuation. Both central banks are neutral on interest rates, but this has stopped speculators from driving up the currencies. It looks as if the message is finally getting attention. Higher U.S. interest rates would help speed up the selling process.