AUD/USD and NZD/USD Fundamental Forecast – February 28, 2017

The Australian Dollar is in a holding pattern early Tuesday and the New Zealand Dollar is weakening ahead of President Trump’s first appearance before the U.S. Congress late Tuesday night. Both currencies moved higher in Asia, helped by a surge in Chinese commodity futures. However, the markets could not hold on to their gains after the U.S. Dollar surged in reaction to positive remarks from Trump to a group of governors. Trump promised that he will make a “big statement” about fixing roads and bridges in his address to Congress.

“I’m going to have a big statement tomorrow night on infrastructure,” Trump said.

Also pressuring the Aussie and the Kiwi was a rise in U.S. Treasury yields. Yields went up as the odds of a March rate hike from the U.S. Federal Reserve moved to 50%. This helped underpin the dollar, making it a more desirable investment.

Helping to boost the odds of a March rate hike was Dallas Federal Reserve President Robert Kaplan, a voting member on the central bank’s policymaking committee. He reiterated his view that a rate hike should come sooner rather than later.

In economic news, durable goods orders rose 1.8 percent in January, slightly above the expected 1.7 percent increase. Pending home sales, dropped 2.8 percent in January to their lowest level in a year.

Forecast

Earlier today, New Zealand posted a merchandise trade deficit of NZ$285 million in January, according to Statistics New Zealand. This number missed forecasts for a shortfall of NZ$25 million, following the NZ$36 million deficit in December. ANZ Business Confidence came in at 16.6, lower than the previous 21.7.

In Australia, HIA New Home Sales was down -2.2%, lower than the previous 0.2%. The Australian Current Account came in at -3.9 billion, in line with the estimate, but a market improvement from the previously revised -10.2 billion. Private Sector Credit rose 0.2%, lower than the 0.5% estimate.

In the U.S., investors will get the opportunity to react to a slew of U.S. economic data, including the major Preliminary GDP and CB Consumer Confidence.

Fourth-quarter preliminary GDP is expected to come in at 2.1%, slightly above the previous 1.9%. Conference Board Consumer Confidence is forecast at 111.3, also slightly below the previous 111.8.

Minor reports include Preliminary Wholesales Inventories, S&P/CS Composite-20 HPI, Chicago PMI and the Richmond Fed Manufacturing Index.

We may not see much activity today as investors await Trump, but even then, the reaction may be short-lived because of key reports from Australia including Fourth Quarter GDP. China is also scheduled to release data on manufacturing.