AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Await RBA Rate Statement

The Australian and New Zealand Dollars closed higher on Monday shortly ahead of Tuesday’s Reserve Bank of Australia rate decision. The markets were underpinned by stronger commodity prices, end-of-the-month position-squaring and renewed U.S. Dollar weakness on the back of continued U.S. political uncertainty.

The AUD/USD settled at .8003, up 0.0018 or +0.23% and the NZD/USD closed at .7512, up 0.0001 or +0.02%.

Iron ore prices jumped by 7.3% on Monday with traders expecting the rally to continue into Tuesday. Copper prices also reached a fresh two-year high while U.S. West Texas Intermediate crude oil futures rose above $50 a barrel for the first time since May.

The Aussie and the Kiwi firmed late in the session on Monday on month-end portfolio adjustments and uncertainty over the U.S. political outlook after the departure of White House director Anthony Scaramucci.

Doubts surrounding the likelihood of Trump realizing his pro-growth agenda, including tax reform, have underpinned the Aussie and Kiwi for weeks. Concerns that low U.S. inflation could lead to a more dovish Federal Reserve have also pressured the Greenback.

In U.S. economic news, pending home sales rose 1.5 percent in June. This was higher than the 0.9% estimate. In May, pending home sales declined 0.7%. Additionally, Chicago PMI came in lower-than-expected at 58.9. Traders were looking for 60.8. In May, the report came in at 65.7.

Forecast

Early Tuesday, investors will get the opportunity to react to the latest AIG Manufacturing Index data. The last read was 55.0.

China is also scheduled to release its Caixin Manufacturing PMI. It is expected to come in at 50.5, up slightly from 50.4. The Aussie and Kiwi could weaken if this report comes in under 50.0, which would indicate a contraction in the economy.

The major news will be the RBA Rate Statement and Cash Rate, due to be released at 0430 GMT.

Investors will be interested in whether the RBA changes the language around the exchange rate other than to again note that a low rate would/could be helpful. They also want to know the central bank’s assessment of the economy and summary of forecasts that will be unveiled in full on Friday.

Most investors agree that the cash rate will remain at 1.5% while futures markets put the odds of a rate movement in either direction at 0%.