AUD/USD and NZD/USD Fundamental Weekly Forecast – After Gloomy Central Bank Comments, Hard to Be Bullish
The Australian and New Zealand Dollars finished mixed last week with the Aussie posting a modest gain and the Kiwi, a small loss. The Australian Dollar firmed after RBA Governor Lowe reiterated the need for fiscal support. The New Zealand Dollar was pressured as a move by central bank policymakers hinted at the possibility of sub-zero rates.
Australian Dollar
After trading sideways-to-lower most of the week, the Australia firmed enough on Friday to finish the week higher. The catalyst behind the strength were comments from Reserve Bank of Australia (RBA) Governor Philip Lowe.
AUD/USD settled at .7173, up 0.0030 or +0.42%.” data-reactid=”26″>Last week, the AUD/USD settled at .7173, up 0.0030 or +0.42%.
Lowe called on all levels of government to “put all shoulders to the wheel” to fund the spending desperately needed to generate jobs and drag the economy out of its deepest recession in about a century.
Having slashed its cash rate to a record low 0.25% and implemented a bond buying program in mid-March, RBA Governor Lowe said there were limits to what monetary policy could do.
“The main game is going to be fiscal and structural policies, that’s the reality we face,” Lowe added.
New Zealand Dollar
sub-zero interest rates.” data-reactid=”31″>The New Zealand Dollar was pressured last week by a bond rally that was sparked by the Reserve Bank of New Zealand (RBNZ) promise to extend its own purchases and, this week, speed them up as well. Additionally, central bank policymakers talked about the possibility of sub-zero interest rates.
NZD/USD settled at .6544, down 0.0084 or -1.27%.” data-reactid=”32″>Last week, the NZD/USD settled at .6544, down 0.0084 or -1.27%.
The RBNZ last Wednesday held its official cash rate at 0.25% in a widely expected decision and expanded its large scale asset purchase (LSAP) programme to as much as NZ$100 billion ($65.39 billion).
The decision making committee said a package of additional monetary instruments must remain in active preparation, which includes negative interest rates, while purchases of foreign assets also remain an option.
Weekly Forecast
This week, Aussie and Kiwi traders will be focusing on business and consumer sentiment reports, but they are going to have to reveal blockbuster news in order to change the already established sentiment.
Although the Aussie edged higher last week, it was headed lower before RBA Governor Lowe mentioned the need for more fiscal stimulus. I’m going to chalk that move up to reactionary short-covering because unless the government makes a statement supporting Lowe’s assessment – it’s just talk.
The RBNZ, on the other hand, has already set the table for lower prices because of its decision to ramp up quantitative easing (QE), which includes the possibility of sub-zero interest.
U.S. Dollar has to do is trade steady to higher along with Treasury yields and I think this will be enough to keep the pressure on the AUD/USD and NZD/USD.” data-reactid=”39″>This week, all the U.S. Dollar has to do is trade steady to higher along with Treasury yields and I think this will be enough to keep the pressure on the AUD/USD and NZD/USD.
unemployment would stay high for several years with the second-most populous state of Victoria battling a fresh wave of coronavirus infections.” data-reactid=”40″>Our assessment of the Aussie was also supported when the RBA downgraded its outlook for the economy and warned unemployment would stay high for several years with the second-most populous state of Victoria battling a fresh wave of coronavirus infections.
Furthermore, New Zealand Prime Minister Jacinda Ardern also shutdown New Zealand’s biggest city Auckland last week after four new cases of coronavirus emerged. She also reinstated strict restrictions that could weaken the economy.
Ardern said citizens in Auckland will be expected to work from home unless they are essential workers, and schools will close, as will bars, cafes and restaurants until at least the end of this week.
Ardern said in a televised press conference, “We’re asking people in Auckland to stay home to stop the spread. Act as if you have COVID, and as though people around you have COVID.”
economic calendar.
” data-reactid=”44″>For a look at all of today’s economic events, check out our economic calendar.
article was originally posted on FX Empire” data-reactid=”45″>This article was originally posted on FX Empire
More From FXEMPIRE:
