The Australian and New Zealand dollars fell sharply last week after the Governor-led Reserve Bank Philip Lowe dropped a policy-tightening bias and instead considers the chances of interest rate or interest rate cuts to be lower. rise as "more balanced". The New Zealand dollar plummeted last week due to the falling Australian dollar and in the expectation of a similar tone from the Reserve Bank of New Zealand (RBNZ) this week. Essentially, investors began to anticipate a possible rate cut later in the year.
For the week, the AUD / USD was 0.7089, down 0.0158 or -2.18% and the NZD / USD 0.7545, down 0.0148 or -2, 15%.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Early last week, the RBA kept its cash at a record 1.5 percent for a 30th month, but abandoned its long-standing forecast that an improvement in the economy meant that the next move would likely be on the rise. "data-reactid =" 25 "> At the beginning of last week, the RBA kept its key interest rate at a record 1.5% for one month – 30th month, but abandoned its long-standing prediction that a Improvement of the economy meant that the next step would probably be on the rise.
In its monetary policy statement, the RBA lowered its growth forecast for gross domestic product (GDP) for the year from the end of June to 2.5% instead of 3.25%. The RBA has also lowered its inflation forecast for the 12 months prior to June 30 from 2% to 1.25%.
The central bank reported slowing growth in other advanced economies, weak consumer spending and the ongoing correction of the real estate market for policy change.
"This revaluation of consumption prospects is based on the downward revision of national accounts and, to a certain extent, on the recent declines in housing market activity," the RBA said in its quarterly release.
Mr. Lowe and RBA decision makers commented dovishly last week, futures traders are starting to anticipate up to two rate cuts later this year.
New Zealand Dollar
In addition to the disruption of sympathy, the weaker-than-expected labor market report contributed to the decline of the Kiwi. The quarterly change in employment was 0.1%. This was well below the forecast of 0.3%. The previous quarter was also revised to 1.0%. In addition, the quarterly unemployment rate climbed to 4.3%, which is above the forecast of 4.1%. The previous quarter had been revised upwards to 4.0%.
This week, the RBNZ will make its first interest rate decision since November. Since then, much has happened, with most major central banks downgrading their outlook for the global economy. In November, RBNZ governor Adrian Orr said the central bank was not considering cuts, but last week's price action indicates that traders expect about 42 percent chance of a reduction soon. June 2019.
The RBNZ should leave its benchmark rate at 1.75%.
In the US, one of Fed Chairman Jerome Powell's speeches will be the main event that could affect the AUD / USD and the NZD / USD. It will exert more influence on the financial markets if it speaks about monetary policy and in particular the slowdown of the world economy.
On Wednesday, traders will have the opportunity to react to the latest figures released by the government on consumer inflation. The CPI is expected to be 0.1%, up slightly from the previous -0.1% reported previously. The core CPI is expected to have increased 0.2%.
Thursday, US base retail sales are expected to stagnate at 0.0%. Retail sales should have increased by 0.1%. Producer prices may have increased by 0.1%.
The low inflation figures should not have much influence on the Fed's policy as it has predicted moderate inflation. Much lower than expected figures could lead to lower treasury yields, making the US dollar a less desirable asset.
We may not see the same degree of selling pressure on the Australian and New Zealand dollars this week as some dovish information has already been incorporated into currencies. In addition, some believe that last week's sales may have been excessive. Any positive developments in trade negotiations between the United States and China could slow sales or even fuel a dramatic recovery.
This article was originally published on FX Empire