AUD/USD and NZD/USD Fundamental Weekly Forecast – Pressured by Growing Fears of Virus’ Economic Fallout
The Australian and New Zealand Dollars finished lower last week as concerns over the economic impact of the coronavirus and future moves by the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) dominated the trade.
Most of the week, the Aussie and Kiwi were pressured by a stronger U.S. Dollar as traders flocked to the greenback for safe-haven protection. On Friday, however, both currencies reversed to the upside after U.S. economic data showed weakness in the manufacturing and services sectors.
Last week, the AUD/USD settled at .6627, down 0.0087 or -1.29% and the NZD/USD finished at .6352, down 0.0082 or -1.28%.
The economic impact of the coronavirus will continue to be at the forefront this week, but the biggest impact will be revealed on Saturday when China releases its Manufacturing PMI and Non-Manufacturing PMI reports.
In Australia, traders will get the opportunity to react to the latest data on Private Capital Expenditure. The report is expected to show a 0.5% increase, up from -0.2%.
In New Zealand, the key reports are Retail Sales and ANZ Business Confidence. Retail Sales are expected to have risen 0.8%. There is no estimate for ANZ Business Confidence, but it is likely to come in worse than the previously reported -13.2.
Australian News
Minutes from the Reserve Bank of Australia’s (RBA) first meeting of the year fuelled expectations of lower interest rates, driving the AUD/USD lower.
The RBA left rates at a record low 0.75% at that meeting, but the minutes showed it was prepared to ease policy further.
In other news, Australian employment surpassed expectations for a third straight month in January but the jobless rate jumped by more than analysts had predicted, a mixed outcome that drove the Aussie lower, while fueling the argument for more stimulus.
Thursday’s data from the Australian Bureau of Statistics (ABS) showed 13,500 net new jobs were created in January, beating forecasts for 10,000 and following a surprisingly strong 28,900 gain in December. All of the increase was led by full-time work, which surged 46,200 while part-time jobs fell by 32,700.
Despite the rise in employment, the unemployment rate jumped to 5.3% from 5.1% in December which was the lowest reading since March 2019 as more people went looking for work. Analysts had predicted that number would rise to 5.2%.
New Zealand News
There were no major releases from New Zealand last week. The Kiwi’s decline was largely attributed to sympathy selling in response to the weakness in the Australian Dollar.
On Friday, RBNZ Governor Orr said in a speech that the central bank needs to be prepared for the unanticipated. He was talking about the economic impact of the coronavirus, of course. He also said he is in no hurry to go lower with the cash rate and the RBNZ is in a favorable position with the Official Cash Rate (OCR) at 1%. He further added that record low international interest rates are a new challenge for the central bank.
Weekly Forecast
Despite Friday’s rebound rally in the Aussie and Kiwi, the trend is likely to remain down. We’re expecting to see a further decline in both currencies because investors are likely to remain skittish over the coronavirus.
Even if reports start to show the virus outbreak receding, global growth is still set to fall to zero in the first quarter. A near-term hit to the Australian and New Zealand economies looks unavoidable.
This article was originally posted on FX Empire
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