AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Pressured as Speculators Increase Bets on Rate Cut

The Australian and New Zealand Dollars are trading lower on Thursday after reversing earlier gains. The early gains were fueled by mixed Australian employment data. The Kiwi was further boosted by fourth quarter consumer inflation data that came in slightly better than expected while dimming the chances of a Reserve Bank of New Zealand rate cut. After the initial surge by the Australian Dollar, sellers emerged in reaction to a major bank’s announcement of a mortgage rate hike.

At 0750 GMT, the AUD/USD is trading at .7101, down 0.0041 or -0.57%. The NZD/USD is at .6778, down 0.0010 or -0.16%.

Although we’re seeing some increased volatility in the New Zealand Dollar, most of the focus today has been on the Australian Dollar.

According to the Australian Bureau of Statistics, Australia’s unemployment rate edged slightly lower in December to a seasonally adjusted 5%, but the number of people in full-time work dropped again. Furthermore, part-time employment drove a 21,600 increase in the number of people with jobs during the month. This was better than the consensus estimate of 18,000 new jobs. However, traders were somewhat disappointed by the news of drop of 3,000 in the number of people employed full-time.

The AUD/USD retreated from its earlier highs to turn lower for the session after the National Australia Bank said it would raise mortgage rates by 12 to 16 basis points. This raised concerns over rising indebtedness at households and the economy overall, leading investors to price in the strong possibility of an interest rate cut later in the year.

Before the release of the Australian employment data, Australian Flash Manufacturing PMI was reported at 54.3, up slightly from 54.0. Flash Services PMI was 51.0, down from the upwardly revised 52.7.

In New Zealand, Credit Card Spending rose 4.5%. This was slower than the previously reported 6.1%.

Forecast

Both the Aussie and Kiwi are likely to remain under pressure today unless there is surprise positive developments over U.S.-China trade relations. Traders are still trying to figure out if there will be higher level negotiations in Washington on January 30-31 amid a report on Tuesday that the meeting had been canceled.

Today’s news of the mortgage rate hike by the National Australia Bank is potentially bearish because of the precarious Australian housing market. The main concern for the RBA is that it will put a burden on consumers which means they will have less money to spend. This should slow economic growth, which would likely force the central bank to cut interest rates later in the year. This is why speculators are selling the AUD/USD on Thursday.

Later today in the United States, traders will get a chance to react to Weekly Unemployment Claims, Flash Manufacturing PMI, Flash Services PMI, and Conference Board Leading Index.