AUD/USD and NZD/USD Fundamental Weekly Forecast – RBA Minutes, RBNZ Interest Rate Decision Due This Week

Last week, the Australian Dollar received a boost in response to a strong labor market. This was more than enough to offset the weakness attributed to the hawkish Fed announcements.

According to the government, the Employment Change report showed the economy added 42,000 new jobs. This helped drive the Unemployment Rate lower from 5.7% to 5.5%.

The news also helped lower the odds of a rate cut later in the year by the Reserve Bank of Australia.

The AUD/USD settled the week at .7615, up 0.0091 or +1.21%.

The New Zealand Dollar continued to post strong gains due to optimism over the economy. The currency did have a little setback in response to the Fed and to a weaker-than-expected quarterly GDP report. However, it was not enough to turn the Forex pair lower for the week. Quarterly GDP came in at 0.5%, above the previous 0.4%, but below the 0.7% forecast.

The NZD/USD settled the week at .7248, up 0.0038 or +0.52%.

The U.S. Dollar was supported by the U.S. Federal Reserve’s decision to raise its benchmark interest rate 25-basis points and to set its target zone at 1.00 to 1.25 percent. The Fed also left open the possibility of additional rate hikes before the end of the year. The central bank also revealed its plan to unwind its $4.5 trillion balance sheet which is another form of tightening.

In economic news, U.S. Producer Prices came in flat as expected. Consumer Inflation, however, missed the estimate with a reading of -0.1%. Retail Sales also came in lower than expected at -0.3%. Building Permits also came in below expectations at 1.17 million units, missing the 1.25 million unit estimate. Housing Starts were also below the estimate at 1.09 million units. Finally, Consumer Sentiment dropped to 94.5. This was below the 97.2 forecast and the previously reported 97.1.

Forecast

This week Australian Dollar investors will get the opportunity to react to comments from Reserve Bank of Australia Governor Philip Lowe, the RBA Monetary Policy Meeting Minutes, and the quarterly Home Price Index.

On June 19, Governor Philip Lowe is going to deliver a speech at the 2017 Crawford Australian Leadership Forum.

The RBA Monetary Policy Minutes on June 20 will provide details of its meeting earlier in June, at which the central bank held rates at 1.50%.

Also on Tuesday, the HPI will provide a quarterly snapshot of the level of activity in the Australian housing sector. During the 4^th Quarter, the indicator jumped 4.1%, well above the estimate of 2.4%. The forecast for Q1 stands at 2.2%.

New Zealand Dollar investors will get the chance to react to the GDT Price Index on June 20, and the Reserve Bank of New Zealand’s interest rate decision and monetary policy statement on June 21.

The RBNZ is expected to leave interest rates unchanged at 1.75%. However, due to the recent rapid appreciation of the New Zealand Dollar, it is expected to try to talk down the currency’s appreciation.

There are no major U.S. reports this week, but several Fed members are on tap to deliver their opinions on the Fed rate hike and the strength of the economy. The market already knows how the Fed feels about future rate hikes so if any speakers deliver a dovish message, the AUD/USD and NZD/USD could be underpinned.

On Monday, investors will get the opportunity to react to comments from FOMC Member William Dudley and FOMC Member Charles Evans.

On Tuesday, FOMC Member Stanley Fischer is scheduled to speak in the morning. He is second in command at the Fed. Later in the session, Robert Kaplan delivers another speech.

Any comments or concerns about inflation and the number of future rate hikes will be market moving events. Aussie and Kiwi traders also want to know how their respective central banks feel about the timing of their next rate hikes and how they feel about their currency’s recent strength.