AUD/USD and NZD/USD Fundamental Weekly Forecast – Aussie Supported by Positive China Data, Reduced Chance of Rate Cut

James Hyerczyk
In other news out of Australia, Reserve Bank of Australia deputy governor Guy Debelle said “decent” economic growth over the next few months would be enough to prevent the bank from having to cut official rates. Dr. Debelle further added that the bank had enough firepower if required to lower official rates further, but the expectations was that it would be required.

The Australian and New Zealand Dollars settled higher last week. The Aussie was helped by positive news from China and upbeat comments from a central bank official. A short-covering rally on Friday bailed out the Kiwi after it spent most of the week under pressure. Increased appetite for riskier assets helped support both currencies as well as dampened concerns over a global economic slowdown.

For the week, the AUD/USD settled at .7172, up 0.0067 or +0.94% and the NZD/USD finished at .6762, up 0.0027 or +0.40%.

There were no major economic reports in Australia and New Zealand last week. Minor reports in Australia included Westpac Consumer Sentiment, Home Loans and the RBA Financial Stability Review. New Zealand released the Business NZ Manufacturing Index.

Consumer Sentiment Rebounds, Home Loans Rise

In Australia, Westpac Consumer Sentiment improved to 1.9% from -4.8%. Home Loans jumped 2.0%, beating the -3.0% forecast.

RBA Sees Household Risk

In its semi-annual assessment of the financial system early Friday, the Reserve Bank cited the danger of a “sharper downturn” in the global economy. It said while banks’ profits remain healthy, increased scrutiny and weaker property and housing credit meant “greater-than-usual uncertainty” about their outlook.

“Risks to the household sector have increased over the past six months given weak housing market conditions,” the RBA said. “Indicators of financial stress remain low outside the mining exposed regions. However, the value of housing loans in arrears has drifted up from very low levels.

“Global economic growth has slowed and downside risks to activity seem to have risen,” the RBA said. “This increases the likelihood of a sharp decline in growth which could be detrimental to financial stability.”

But RBA Governor Debelle Does Not See Rate Cuts Coming

In other news out of Australia, Reserve Bank of Australia deputy governor Guy Debelle said “decent” economic growth over the next few months would be enough to prevent the bank from having to cut official rates. Dr. Debelle further added that the bank had enough firepower if required to lower official rates further, but the expectations was that it would be required.

“Our expectation is that we will see decent growth in the economy,” he said.

China Trade Balance Another Positive

Stronger-than-expected exports data out of China also lifted stocks. Exports in China rose 14.2 percent in dollar terms last month, nearly double what economists expected.

Weekly Forecast

This week is holiday shortened with Friday being a bank holiday in the U.S., Australia and New Zealand.

Before the bank holiday, investors will get the opportunity to a slew of economic data including Reserve Bank of Australia Monetary Policy Meeting Minutes, a report on Employment Change and Unemployment Rate.

New Zealand will release a report on quarterly consumer inflation. It is expected to have risen 0.3%.

Chinese GDP is expected to have risen 6.3%, down slightly from the previously reported 6.4%.

U.S. traders will have a chance to react to reports on retail sales and core retail sales.

Look for more short-covering by the Australian Dollar if China GDP and Australian labor market data comes in better-than-expected.

This article was originally posted on FX Empire

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