AUD/USD and NZD/USD Fundamental Daily Forecast – Look for a Two-sided Trade with Investors Dealing with Fed, Domestic Data

The Australian and New Zealand Dollars posted solid gains early in the session in reaction to domestic news, put prices retreated after the U.S. Federal Reserve hinted at another interest rate hike.

On Wednesday, the AUD/USD settled at .8030, up 0.0022 or +0.27% and the NZD/USD closed at .7355, up 0.0039 or +0.53%.

The Aussie was underpinned early in the session thanks to rising hopes about the future of the Australian economy.  Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis supported the Australian Dollar by stating that global growth is more than a “flash in the pan”. Although Ellis stated that economic growth could slow in the immediate-future, she remained confident that “This is positive news for the Australian economy”.

The New Zealand Dollar traded at its highest level in 6 ½ weeks as one poll showed the country’s National Party pulled ahead of the rival Labour Party ahead of a general election this week-end.

Support for the National Party jumped 6 points to 46 percent, according to the One News-Colmar Brunton opinion poll, while support for the opposition Labour party slumped by seven points to 37 percent.

The Australian and New Zealand Dollars retreated from their highs after the Fed said it would begin reducing its $4.5 billion balance sheet starting in October. All nine members of the monetary policy committee voted for the action.

Additionally, the Federal Open Market Committee left its benchmark interest rate unchanged at<1.25 percent.

Finally, the FOMC did indicate a possible third rate hike could take place before the end of the year, which would bring the target up to between 1.25 percent and 1.50 percent.

The Fed news drove up U.S. Treasury yields which made the U.S. Dollar a more attractive investment.

Forecast

Early Thursday, investors will get the opportunity to react to New Zealand GDP data. The quarterly report is expected to show the economy grew by 0.8%, up from 0.5%. The Visitor Arrivals report is also due to be released.

In Australia, investors will get the chance to react to the RBA Bulletin. The bulletin gives an overview of RBA operations and the Australian economy and may move the Australian Dollar if the outlook is particularly positive or negative.

Over recent months, Australian unemployment has remained flat at 5.6% while GDP growth has fluctuated; this may mean that the bulletin gives a mixed look at the Australian economy.

This might not cause any notable AUD movement, as it would not be a clear positive or negative assessment.

The direction of the NZD/USD will be determined by what investors believe is the priority at this time. Investors are dealing with this weekend’s election, the possibility of higher U.S. rates and quarterly GDP.

AUD/USD traders are dealing with an upbeat assessment of the economy, the possibility of higher U.S. rates and the RBA Bulletin.

These combinations could cause a volatile two-sided trade today.