Rising U.S. Treasury yields and hawkish testimony by Fed Chair Jerome Powell put pressure on the Australian and New Zealand Dollars most of the week before Trump’s surprise tariff announcement reversed the course of the U.S. Dollar.

The AUD/USD settled the week at .7761, down 0.0075 or -0.96% and the NZD/USD finished at .7238, down 0.0052 or -0.72%.

In other news, ANZ Business Confidence was -19.0, an improvement from the previous -37.8. A report on Australian Private Capital Expenditure showed a 0.2% decline versus a 1.0% forecast. The previous month was revised to 1.9%.

Early in the week, the Aussie and Kiwi trended lower in reaction to a sharp rise in U.S. Treasury yields. Yields were boosted by hawkish comments from Fed Chair Jerome Powell who said the central bank could raise interest rates three or more time during the course of this year to prevent the U.S. economy from overheating.

“We’ve seen some data that in my case will add some confidence to my view that inflation is moving up to target,” Powell told lawmakers on Tuesday. “We’ve also seen continued strength around the globe. And we’ve seen fiscal policy become more stimulative. So I think each of us is going to be taking the developments since the December meeting.”

The selling pressure reversed late in the week after President Trump announced tariffs on steel and aluminum. Trump said the U.S. will implement a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports this week. The surprise announcement sent stocks reeling, with the Dow losing about 500 points over two session. It also raised concern that Canada, Asia and Europe may implement retaliatory tariffs on U.S. exports.

Forecast

Early in the week, the focus for Forex traders will be on the Italian elections and further fallout from Trump’s tariff announcements. A stronger-than-expected showing for the anti-establishment 5-Star Movement will be bad for the Euro and the implementation of retaliatory tariffs should have a negative influence on the U.S. Dollar. The Australian and New Zealand Dollar could attract buyers if those two benchmark currencies weaken substantially.

Besides the uncertainty surrounding the tariff news, there is a slew of major economic data this week from Australia and the United States.

The week starts with the U.S. releasing its latest data on ISM Non-Manufacturing PMI. It is expected to come in slightly lower than the previous month at 58.9.

Early Tuesday, Australia’s Current Account is expected to come in at -12.3 Billion, lower than the previous -9.1 Billion. However, Retail Sales are expected to rise 0.4%, a marked improvement from the previously reported -0.5%.