AUD/USD and NZD/USD Fundamental Daily Forecast – RBNZ Makes Historic Rate Hike; Aussie Output Contracts

The New Zealand and Australian Dollars are trading mixed on Wednesday on low volume ahead of Thursday’s U.S. bank holiday.

In New Zealand, the central bank raised interest rates as expected. In Australia, Flash PMI data came in below expectations.

In the United States, traders face a plethora of economic data including Durable Goods, Weekly Unemployment, Flash Manufacturing PMI and Non-Manufacturing PMI and New Home Sales.

Additionally, the University of Michigan will release fresh data on Consumer Sentiment and Inflation Expectations.

The major market moving event, however, will be the FOMC Meeting Minutes, due to be released at 19:00 GMT.

At 05:05 GMT, the AUDUSD is trading .6638, down 0.0010 or -0.15% and the NZDUSD is at .6159, up 0.0006 or +0.10%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $65.76, up $0.40 or +0.61%.

Reserve Bank of New Zealand Delivers Record Rate Hike, Signals More to Follow

The Reserve Bank of New Zealand (RBNZ) on Wednesday delivered its biggest interest rate hike and outlined a more hawkish monetary tightening path in coming months as it tries to rein in stubbornly high inflation.

The RBNZ raised the official cash rate (OCR) by 75 basis points to 4.25%, its highest since January 2009. Policymakers also increased the projected peak for the cash rate to 5.5% in September 2023 when it expects it to remain into 2024.

“The OCR needs to reach a higher level, and sooner than previously indicated, to ensure inflation returns to within its target range over the medium term,” the RBNZ said in a statement.

Australian Flash PMI Falls for Second Straight Month

Australian private sector output contracted for a second consecutive month in November, according to a flash PMI report.

The S&P Global Flash Australia Composite Output Index fell from 49.8 in October to 47.7 in November.

Daily Outlook

With the RBNZ rate hike and Aussie PMI data out of the way, traders will now shift their focus to the U.S. economic data and Fed news.

Traders betting on a softer tone from the Fed in December will be looking at today’s U.S. economic reports for weakness in consumer spending on durable goods, manufacturing and services. An increase in weekly jobless claims will also help support the case for a 50 basis point rate hike instead of a 75 basis point move.

Traders will also have the chance to react to the minutes from the last Fed meeting in early November. Traders will be looking for signs of a pivot by Fed officials although recent comments from several policymakers indicate that interest rates will continue to rise.