Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Hawkish Fed Minutes Could Put Pressure on Aussie, Kiwi
The Australian Dollar and New Zealand Dollar are trading lower early Wednesday, but inside yesterday’s range. This chart pattern tends to indicate investor indecision and impending volatility. The indecision is likely being fueled by concerns over the U.S. Federal Reserve’s September meeting minutes, which are due to be released at 1800 GMT. Aussie Dollar traders may be looking ahead to Thursday’s Employment Change report.
At 0512 GMT, the AUD/USD is trading .7135, down 0.0006 or -0.09% and the NZD/USD is at .6581, down 0.0006 or -0.09%.
The Australian Dollar finished higher on Tuesday with most of its gains attributed to increased demand for risky assets. Traders showed little reaction to the Reserve Bank of Australia minutes of its October meeting, which did not provide many new insights. The minutes were mostly optimistic, going as far as mentioning that the strong U.S. Dollar, while generally negative to emerging market economies, was helping to support the Australian economy.
Most importantly, the RBA reiterated that the next move in interest rates will likely be a rate hike, not a cut, but it will not happen over the near-term.
The New Zealand Dollar rose sharply higher as consumer inflation exceeded economist expectations in the third quarter. The consumer price index rose 0.9 percent in the three months to the end of September, well above the 0.7 percent increase that Westpac economists had been expecting.
The Kiwi likely rose because the strong number likely reduced the odds of a Reserve Bank of New Zealand rate cut that had been forecast by some analysts.
In economic news, U.S. industrial production increased for a fourth straight month in September, boosted by gains in manufacturing and mining output, but momentum slowed sharply in the third quarter.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, was unchanged at 78.1 percent. It is 1.7 percentage points below its 1972-to-2017 average.
Job openings hit a record in August, indicating companies could face more inflationary pressures ahead with a tight labor market. The vacancies level hit 7.14 million for the month, according to the Job Openings and Labor Turnover Survey (JOLTS), a report Federal Reserve officials watch closely for clues about where employment stands. The total number of hires also reached a record of 5.78 million.
Forecast
Demand for risk, economic reports and the Fed minutes should dictate the direction of the AUD/USD and NZD/USD on Wednesday.
Increased demand for risky assets could continue to underpin the Forex pairs.
Strong U.S. economic data and hawkish Fed minutes should be bullish for Treasury yields which will make the U.S. Dollar a more attractive investment and put pressure on the Australian and New Zealand Dollars.
U.S. Building Permits are expected to come in at 1.27 million units. This will be up slightly from 1.25 million units. Housing Starts are forecast at 1.22 million units, down from 1.28 million units.
The Fed is scheduled to release the minutes of its September meeting at 1800 GMT. Traders will be looking for more details as to the pacing of the central bank’s future rate hikes. At the meeting, the Fed increased its benchmark rate by 25 basis points, while hinting at a similar move in December. The central bank also said it could increase rates at least three times in 2019 and perhaps once more in 2020.
One thing that traders don’t expect the minutes to reflect is last week’s rapid rise in U.S. Treasury yields and its negative impact on the stock market.
This article was originally posted on FX Empire
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