The appeal of the Australian Dollar (AUD) has wavered following a weaker consumer confidence survey, with the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate forecast to weaken on the back of the latest employment data.
Demand for the New Zealand Dollar (NZD) saw a boost on the back of the latest REINZ house sales data, which demonstrated further bullishness within the local housing market. As a more robust housing sector generally points towards greater economic strength this result encouraged hopes that the Reserve Bank of New Zealand (RBNZ) would not opt to cut interest rates again imminently.
However, this was not enough to deter the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate from making strong gains throughout the day. Tuesday’s NAB Business Confidence Index showed a stronger-than-expected uptick in domestic sentiment, rising from 3 to 6 and shoring up demand for the ‘Aussie’ (AUD). This improvement suggested that conditions within the Australian economy have continued to tighten, in spite of market volatility in the earlier months of the year.
This bullishness was not to last, however, as the Westpac Consumer Confidence survey for April revealed a sharp decline. Sentiment weakened by -0.4% on the month, at odds with the improving business outlook and indicating that consumers remained concerned with the domestic economy. As a result the appeal of the Australian Dollar weakened on Wednesday morning.
The ‘Kiwi’ climbed higher, meanwhile, following a stronger New Zealand Food Prices Index. Rising from -0.6% to 0.5% in March, this more bullish showing could signal that inflationary pressure within the domestic economy is growing. Consequently the AUD/NZD exchange rate was inclined to shed its recent gains, with the New Zealand Dollar entering a strong uptrend across the board.
While the latest Chinese trade data later suggested that the odds of a hard landing have reduced, this failed to particularly boost the ‘Aussie’ against rivals. Market risk appetite was not especially improved by the news that Chinese exports had risen further-than-forecast in March, with investors more concerned by Australian data and particularly hawkish commentary from Richmond Fed President Jeffrey Lacker.
This morning’s New Zealand Manufacturing PMI is likely to trigger greater volatility for the AUD/NZD currency pair. Should the manufacturing sector display continued strong expansion then the ‘Kiwi’ is expected to extend its bullish run against the majors, as positive domestic data diminishes the odds of further RBNZ loosening action.
More substantial movement for the ‘Aussie’ is expected with the release of the latest Australian employment data, which could well eclipse any supportive developments for the AUD/NZD exchange rate if it proves disappointing. Markets anticipate that the domestic Unemployment Rate will have ticked higher from 5.8% to 5.9%, indicating a persistent weakening of the labour market. However, should employment rise significantly to hold the rate lower this could be grounds for a renewed Australian Dollar rally.
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