The AUD/NZD exchange rate plummeted to a one-year-low last week as the ‘Aussie’ rally stopped short, allowing the ‘Kiwi’ to advance. The ‘Aussie’ began to recover during Friday trade as investors sold the ‘Kiwi’ from its highs.
The Australian Dollar recently came to the end of a bullish run, with ‘Aussie’ investors buying the currency consistently for the last two weeks on positive data as well as high risk sentiment.
Positive growth news from the beginning of June kick-started the currency’s rally, which extended into last week when the Reserve Bank of Australia (RBA) announced that the key interest rate would not be cut in June.
As a result, the Australian Dollar rally continued until it was halted by a shift in risk-sentiment. A strengthening US Dollar as well as falling prices of iron ore, Australia’s main commodity export, saw investors selling the Australian Dollar on Wednesday and Thursday.
Mixed Australian data, as well as the ‘Aussie’s ties to iron ore caused AUD/NZD to plummet to a one-year-low of 1.0412 as sentiment for the ‘Kiwi’ remained comparatively strong.
As a result, the pair dropped well below the week’s opening levels of 1.0583. During Friday afternoon of the London session, AUD/NZD trended in the region of 1.0450, rising from its low.
Despite its plummet earlier in the week, sentiment towards the Australian Dollar remained relatively strong as markets drew to a close on Friday.
The New Zealand Dollar plummeted during Friday’s session as investors sold the currency from its impressive highs against many major rivals, including the ‘Aussie’.
Markets reacted bullishly towards the ‘Kiwi’ earlier in the week, as strong sentiment towards the Australian Dollar lent strength to its neighbour currency too.
News that the RBA had left rates frozen also benefitted the New Zealand Dollar, with investors reacting by readjusting their Reserve Bank of New Zealand (RBNZ) bets.
The RBNZ was previously expected to cut the key interest rate in its meeting last week, but investor bets paid off when rates were left frozen, causing the ‘Kiwi’ to soar.
However, the New Zealand Dollar slipped from its highs due to a drop in risk-sentiment as well as a bout of profit-taking from its recent highs.
Relatively influential New Zealand credit card data released on Friday may also have weighed the ‘Kiwi’ down.
Retail card spending slipped -0.3% in May, down from 0.8% in April despite being expected to score 0.5%. Card spending worsened from a lowered April score of 1.3% to -0.6% in May.
With risk sentiment decidedly down as of Friday’s session, movement in the AUD/NZD exchange rate could be a little more volatile and muted in the coming week.
Both Australia and New Zealand have relatively influential data due for release throughout the week, beginning with Australia’s consumer inflation expectation and business confidence reports on Tuesday.
The week’s New Zealand economic calendar includes the latest REINZ house sales report, as well as the June 15th auction on prices of dairy, the nation’s most lucrative commodity.
However, the most highly anticipated data next week will be the Australian labour report on Thursday, which follows shortly after New Zealand’s key Q1 Gross Domestic Product (GDP).
As Australia’s Q1 GDP printed well above expectations earlier in June, analysts are likely to speculate a similar outcome in the upcoming New Zealand figures. If New Zealand growth beats expectations, it could see the ‘Kiwi’ pushing the ‘Aussie’ down to new lows.
Risk sentiment will also influence the pair as always. If prices of iron ore improve, the AUD/NZD exchange rate could recover further from its lows.
At the time of writing, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate trended in the region of 1.0450, while the New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate traded at around 0.9565.
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