AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Reacting to Falling U.S. Rates, Dollar Plunge

The Australian and New Zealand Dollars posted solid gains against the U.S. Dollar on Monday with the Kiwi moving more than one-percent higher. There weren’t any major economic reports from Australia, New Zealand or the U.S. with the primary driving force behind the price action likely the political turbulence in the United States.

The AUD/USD settled at .7474, up 0.0020 or +0.27% and the NZD/USD closed at .6996, up 0.0071 or +1.03%.

Traders continued to dump the U.S. Dollar in reaction to U.S. President Donald Trump’s alleged links to Russia and his firing of former FBI chief James Comey raised concerns about his ability to push through his economic agenda and promised fiscal stimulus.

The AUD/USD and NZD/USD are likely to continue to find support if Trump’s problems escalate further and impeachment claims intensify. The falling dollar strongly indicates that Trump will have a hard time pushing forward his ambitious tax cut and infrastructure spending plans.

The New Zealand Dollar soared on heavy speculative buying related to the possibility of Trump’s impeachment. Traders are betting that Trump’s ouster as President will lessen the possibility of tariffs on the country’s exports. If you recall, last month the Kiwi was hit hard by speculation that Trump would go after the New Zealand dairy industry.

Forecast

Lower Treasury yields should continue to pressure the U.S. Dollar on Tuesday and consequently support the AUD/USD and NZD/USD. There is the possibility of profit-taking as investors prepare for the release of the Fed meeting minutes on Wednesday.

It will be a busy day in the U.S. as far as economic activity is concerned. Early in the session, traders will get the opportunity to react to U.S. Flash Manufacturing PMI, Flash Services PMI, New Home Sales and the Richmond Manufacturing Index.

Several Fed members are also scheduled to speak.

Weaker economic data is not likely to prevent the Fed from raising rates in June, but it is likely to reduce the odds of numerous future Fed rate hikes. Investors will also be listening to the Fed speakers for clues as to the timing and number of future rate hikes.

There’s not much to do about the situation in Washington because former FBI Director James Comey is not scheduled to testify before the Senate Intelligence Committee until next week and the special prosecutor’s report won’t be released for months. Any breaking stories will be highly speculative.