AUD/USD and NZD/USD Fundamental Daily Forecast – Tax Reform Announcement, Robust GDP Could Pressure Aussie, Kiwi

The Australian and New Zealand Dollars are starting to weaken shortly ahead of the U.S. opening. A stronger U.S. Dollar is putting pressure on the Aussie and Kiwi. Both are feeling pressure because of higher U.S. Treasury yields. However, stronger demand for risky assets are helping to limit losses. The New Zealand was also affected by negative comments from Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler.

The U.S. Dollar is bouncing back because of technically oversold conditions, a weaker Euro and position-squaring ahead of several key U.S. economic reports this week. Also helping the dollar recover is the unwinding of the risk trades placed in response to North Korea’s launching of a missile over Japan.

The focus for Aussie and Kiwi traders is expected to return to more traditional fundamentals on Wednesday.

President Trump is expected to announce his tax reform plan. His next step will be to gather support for the plan which his administration developed with Republicans. Given his past history with previous pieces of legislation, he is going to have to convince the Democrats to go along with the plan. If not, the process of tax reform could drag on for weeks.

Traders will also get to respond to the latest report from ADP. Its Non-Farm Employment Change report is expected to show the private sector added 185K jobs in August.

The major report is quarterly Preliminary GDP. It is forecast to show the economy grew by 2.7%, up slightly from the previous 2.6%.

In other news, New Zealand Building Consents came in at -0.7%. In Australia, Building Approvals came in at -1.7%, better than the -5.4% estimate. Construction Work Done blew away the 0.9% forecast with a 9.3% read.

Also on Wednesday, RBNZ Governor Graeme Wheeler said that a lower New Zealand Dollar was needed to help bolster the export sector and push up inflation. This news also pressured the Kiwi from its high.

The tax reform discussion, a strong ADP number and a better-than-expected GDP report could be supportive for the U.S. Dollar. This would put pressure on the Australian and New Zealand Dollars. However, losses could be limited by a surge in U.S. equity prices.