AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Waiting for China Inflation Data

The Australian and New Zealand Dollars are trading mixed shortly before the release of China’s latest reports on consumer inflation and producer inflation at 0130 GMT. CPI is expected to come in at 1.6%, slightly above the previous 1.5% reading. PPI is expected to come in at 5.5%, unchanged from the previous reading.

At 0037 GMT, the AUD/USD is trading .7604, up 0.0004 or +0.06%. The NZD/USD is at .7270, down 0.0010 or -0.14%.

There are no reports from Australia or New Zealand on Monday. Early Tuesday, Australia will release a pair of minor reports. NAB Business Confidence came in at 7 last month, a read above 0 indicates improving conditions. Traders watch this report because it’s a leading indicator of economic health. The Home Loans report is expected to rise 1.6%, up from -1.9%. This report is also a leading indicator. It shows demand in the housing market.

The inflation data from China will provide investors with clues on the strength of China’s economy. A strengthening economy will benefit Australia and New Zealand because the countries are major trading partners with China.

Forecast

China’s inflation data will have to come out substantially stronger to have an effect on the AUD/USD and NZD/USD since traders are primarily focused on global interest rates at this time.

Although there are no major U.S. reports scheduled for Monday, investors are likely to continue to react to Friday’s stronger-than-expected U.S. Non-Farm Payrolls report which sent U.S. Treasury yields higher.

Besides the economic data, investors are watching the interest rate differential between Australian and New Zealand Bonds and U.S. Treasury Bonds. A further tightening of the spread will put pressure on the Aussie and Kiwi since this will mean U.S. yields are raising faster than Australian and New Zealand yields. This will make the U.S. Dollar a more attractive investment.