AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Already Prepping for U.S. NFP Report on Friday

The Australian and New Zealand Dollars posted volatile swings on Wednesday after the U.S. Federal Reserve released the minutes of its June 13-14 meeting before finishing mixed. The minutes showed the central bankers were divided over the pace of future U.S. rate hikes, but still voted to raise interest rates in June.

The AUD/USD settled at .7603, down 0.0001 or -0.01% and the NZD/USD ended the session at .7289, up 0.0005 or +0.07%.

The Fed failed to reveal when it would begin trimming its balance sheet, but in my opinion the minutes still sounded hawkish enough to underpin the U.S. Dollar.

In other news, Australia’s trade surplus blew away the forecast, coming in well-above expectations. The driving force was a surge in commodity exports.

Early Thursday, Australia reported a seasonally adjusted trade surplus of A$2.47 billion ($1.9 bn) for May, an increase of A$2.38 billion on the revised A$90m (previously A$555m) surplus seen in April, according to the Australian Bureau of Statistics. Traders were looking for a surplus of $1.1 billion.

On a seasonally adjusted basis, exports climbed by $2.58 bn, or nine percent during the month, driven mainly by a 62 percent surge in the value of coal exports and a 39 percent jump in the value of liquid natural gas exports.

Imports rose by $205 million, or one percent during the month, on a seasonally adjusted basis.

The reaction to the news was muted because investors realized the jump was related to Cyclone Debbie in late-March. Commodity exports were heavily impacted by the storm, which caused temporary production stoppages at several Queensland mines and widespread damage to rail lines.

There was a disruption to the rail infrastructure after Cyclone Debbie hit, but exports jumped after everything came back online.

Forecast

In economic news, traders will get the reaction to a number of U.S. reports including Challenger Job Cuts, the ADP Non-Farm Employment Change, Weekly Unemployment Claims and the ISM Non-Manufacturing PMI.

Minor reports include the Trade Balance and Final Services PMI. FOMC Member Jerome H. Powell is also scheduled to speak. Given the mixed signals from the Fed minutes, I expect Powell’s comments to carry more weight than the economic data. However, everything will be put on hold if the situation with North Korea escalates. Furthermore, I’m not sure investors want to move the AUD/USD or the NZD/USD too much ahead of Friday’s U.S. Non-Farm Payrolls report.

We could see another steady session today ahead of Friday’s U.S. Non-Farm Payrolls report, but we could see volatility if investors decide to shed higher-yielding assets in response to an escalation of activity over North Korea.