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The Australian and New Zealand Dollars finished lower last week, with the Kiwi absorbing most of the losses. The lack of progress in U.S.-China trade talks continued to keep a lid on prices as well as fear of a global recession. Excessive volatility in the global bond market also fueled a choppy, two-sided trade. With investors in both the Aussie and the Kiwi expecting more rate cuts by their respective central banks, it’s going to be hard to mount a meaningful rally although the recent price action suggests the currencies may be ripe for a counter-trend rally.
Last week, the AUD/USD settled at .6783, down 0.0005 or -0.07% and the NZD/USD closed at .6425, down 0.0041 or -0.63%.
New Zealand Dollar
There wasn’t much movement in the NZD/USD last week with the Forex pair posting an inside move, following the previous week’s extremely wide range. The shock of the unexpected 50-basis point rate cut by the Reserve Bank of New Zealand (RBNZ) continues to influence the price action with buyers reluctant to go against the down trend.
Australian Dollar
The AUD/USD performed relatively well last week, helped by an unexpected jump in the Employment Change report. The overall labor situation looked rosier than expected with the Wage Price Index coming in at 0.6%, better than the 0.5% forecast. The Employment Change report showed the economy added 41.1K jobs in July versus a 14.2K estimate. The Unemployment Rate held steady at 5.2%.
Gains were limited last week by a dovish speech from the Reserve Bank of Australia’s (RBA) No. 2 official, Deputy Guy Debelle. He said global firms’ are unlikely to maintain their strong hiring while they stall investment amid the U.S.-China confrontation, pushing the world into an avoidable slump.
Debelle further warned that while Australia is currently benefiting from Beijing’s domestic stimulus, it too will eventually suffer from the trade war fallout.
“In the end, the decision to build or not build that new factory needs to be taken,” Debelle said in the text of a speech in Sydney on August 15. “The longer businesses hold off, the weaker demand will be, which will further confirm the decision to wait. That runs the risk of a self-fulfilling downturn.”
Weekly Forecast
New Zealand Dollar traders will have the chance to reaction to a Retail Sales report on Friday. It is expected to come in at 0.1%, below the previous quarter’s 0.7% increase.
The Reserve Bank of Australia Monetary Policy Meeting Minutes will be featured on Tuesday. Traders will be looking for clues that could help them determine the frequency of future rate cuts by policymakers.