AUD/USD and NZD/USD Fundamental Daily Forecast – Weak U.S. Economic Data Bullish for Aussie, Kiwi

The Australian and New Zealand Dollars are soaring against the U.S. Dollar on Friday on the back of weaker-than-expected U.S. economic data which could mean the Fed may not raise interest rates the rest of the year.

At 1500 GMT, the AUD/USD is trading .7809, up 0.0081 or +1.05% and the NZD/USD is trading .7336, up 0.0016 or +0.22%.

The AUD/USD and NZD/USD extended their earlier gains as weaker-than-forecast data on consumer inflation and retail sales in June raised doubts about the strength of the U.S. economy and whether it is strong enough to handle a Federal Reserve rate hike later in the year.

According to the CME’s FedWatch tool, futures markets pricing suggests less than a 50 percent chance of a rate hike over the next year.

The U.S. Labor Department reported on Friday that its Consumer Price Index came in at 0.0%, lower than the 0.1% forecast, but slightly better than the previous -0.1% read. Core CPI was 0.1%, the same as last month, but below the 0.2% estimate.

Government officials blamed the weak CPI reading on declines in gasoline and mobile phone services.

In the 12 months through June, the CPI increased 1.6 percent – the smallest gain since October 2016 – after rising 1.9 percent in May. The year-on-year CPI has been softening steadily since February, when it hit 2.7 percent.

In a separate report, the Commerce Department said retail sales fell 0.2 percent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets. Americans also cut back on spending at restaurants and bars, as well as on hobbies.

The AUD/USD and NZD/USD extended their rallies after University of Michigan Consumer Sentiment fell to 93.1 in July.  Economists expected consumer sentiment to hit 95 in July.

U.S. consumer sentiment last fell to 95.1 in June, sinking 2.1 percent from May.

Today’s news drove down U.S. Treasury yields, helping to widen the spread between Australian, New Zealand and U.S. government bonds, making the Australian and New Zealand Dollars more attractive investments.