The Australian and New Zealand Dollars were down sharply last week as investors reacted to bearish domestic and U.S. economic data. The Reserve Bank of Australia (RBA) was partially responsible for the weakness in the Aussie while the Reserve Bank of New Zealand (RBNZ) was indirectly behind the selling of the Kiwi. Both currencies were pushed lower by stronger-than-expected U.S. Non-Farm Payrolls data.
AUD Influenced by RBA Statement
The AUD/USD settled at .7929, down 0.0056 or -.70% and the NZD/USD ended the week at .7412, down 0.0099 or -1.31%.
The Aussie started the week under pressure due to an aggressive sell signal issued by Goldman Sachs on July 27. The selling pressure strengthened following the release of the RBA’s interest rate decision and interest rate statement on August 1.
The RBA slightly downgraded its growth forecasts for the Australian economy while predicting a bounce back over the next few years as inflation returns to normal levels. It also added that the recent surge in the Australian Dollar will stymie the pace of recovery.
“Further exchange rate appreciation would tend to generate a slower pick-up in economic activity and inflation,” the RBA added.
RBA governor Philip Lowe also warned that the rising Australian Dollar had become a threat to growth, inflation and employment.
Weak Domestic Data Weighs on NZD
The New Zealand Dollar closed lower last week in response to weaker-than-expected domestic employment data.
The NZD/USD settled the week at .7412, down 0.0099 or -1.31%.
Official government figures showed the unemployment rate edged down to 4.8 percent in the three months to June, from 4.9 percent in the previous quarter. However, the Employment Change was down 0.2 percent, below the 0.7% estimate. The last quarter showed a 1.1% gain.
The New Zealand Dollar fell against the U.S. Dollar as investors reduced the chances of a sooner-than-expected RBNZ interest rate hike.
Jobs Data Boosts USD
Also influencing the price action was U.S. Non-Farm Payrolls report. According to government, the U.S. economy added 209,000 jobs in July, while the unemployment rate fell to 4.3 percent, the lowest since March 2001. The payrolls number exceeded the median forecast of 183,000, while the unemployment rate met expectations.
The most closely watched number of the report was the average hourly wages. It was unchanged from previous months with average hourly earnings up 2.5 percent on an annualized basis. The average work week also was unchanged at 34.5 hours. Stated another way, Average Hourly Earnings were up 0.3%, equally the forecast. This was up from the previous 0.2% read.