The Australian and New Zealand Dollars closed higher last week against the U.S. Dollar, but a drop in appetite for riskier assets may have limited gains. Stronger-than-expected domestic data helped underpin the Aussie, while Kiwi investors shrugged off a steep decline in quarterly GDP, choosing instead to focus on expectations for better numbers during the third quarter as the government lifts COVID-19 restrictions.
The Australian Dollar reversed early losses last week after highly anticipated minutes from the central bank’s September monetary policy meeting stopped short of signaling a further cut to the cash rate.
The minutes showed the Reserve Bank of Australia (RBA) will maintain its “highly accommodative settings” as long as required and will continue to consider how further policy measures could support the economy. However, it did not indicate a policy action was imminent.
In other news, Australia’s unemployment rate fell, but those without work say it is not getting any easier to find a job, especially in locked-down Victoria.
Official Bureau of Statistics figures show 111,000 jobs were created last month pulling the headline unemployment rate down from 7.5 to 6.8 percent.
The percentage of underemployed people, who wanted to work more hours than they did, remained steady at 11.2 percent.
Total hours worked rose 1.6 percent last month but is still down 5.1 percent on August last year.
New Zealand Dollar
New Zealand fell into its deepest economic slump on record in the second quarter as its battle against the coronavirus pandemic paralyzed business activity, official data showed on Thursday.
Gross domestic product contracted a seasonally adjusted 12.2% quarter-on-quarter, its sharpest quarterly contraction on record and largely in line with forecasts of a 12.8% decline from economists polled by Reuters.
The Reserve Bank of New Zealand (RBNZ) had forecast a quarterly and annual GDP decline of 14% in its August statement.
Economists say the GDP data will have little impact on RBNZ policy, which is expected to hold interest rates at a record low of 0.25% at its meeting on September 23.
Economists are also saying that New Zealand will bounce back faster, while other nations are still struggling to contain the coronavirus. Some are saying that the June quarter’s record-breaking GDP decline will be followed by a record-breaking rise in the September quarter. However, the Treasury says that while New Zealand’s response to COVID-19 helped lessen the short-term economic shock, massive debt and continuing disruptions will delay a full recovery.
The AUD/USD could struggle this week as interest rate futures are still almost fully pricing in a 15 basis point rate cut in October. The Aussie has meandered since hitting a two-year high at .7414 on September as market pricing shifted rapidly in favor of a cut to the cash rate to 0.1% after its September policy meeting.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
More From FXEMPIRE:
- Current Position of the Market
- Rising Oil Short; Specs Left Blindsided in Natural Gas and Coffee
- RESERVE BANKING – THE ELEPHANT IN THE ROOM
- Rolls-Royce to Raise 2.5 Billion Pounds to Strengthen Balance Sheet as COVID-19 Hurt
- Natural Gas Price Fundamental Weekly Forecast – Next Major Move Hinges Upon LNG Demand
- Weekly Recap: Bitcoin and Ethereum Provide Substantial Returns Despite Uncertainty the Market