In spite of picking up prior to the weekend on low New Zealand Business Confidence, the AUD/NZD exchange rate is today trending lower in advance of the Reserve Bank of Australia (RBA) Rate Decision.
Times continued to be tough for both the ‘Aussie’ (AUD) and ‘Kiwi’ (NZD) over the past week, with both currencies equally damaged by the decline of the global commodity market and Chinese economic slowdown.
However, a poor Business Confidence figure, significantly more pessimistic than the previous reading, from New Zealand on Friday saw the ‘Kiwi’ falter and the AUD/NZD exchange rate pick up to hit a new weekly high of 1.1109 before trending upwards into the weekend.
Month-on-month Private Sector Credit for Australia fell a little short of expectations, 0.4% rather than the forecast 0.46%, but that failed to particularly dent the improved outlook of the ‘Aussie’ as the AUD/NZD pairing entered the weekend trending at a steady 1.1068.
This morning’s Australian Manufacturing PMI was significantly more positive than expected, hitting 50.4 instead of 45.8, and finally tipping the figure over the 50 point threshold to return to a state of growth, albeit by relatively narrow margin. Nevertheless, after peaking at 1.1019, the AUD/NZD pairing has since then begun to shed value.
With tomorrow’s upcoming Interest Rate Decision by the Reserve Bank of Australia (RBA) it seems natural for traders to be somewhat circumspect with regards to the ‘Aussie’ at this time. Speculation that a rate cut might be on the cards this month is a cause for concern for many, although there are equally arguments that the RBA will opt instead to hold rates steady at the current record-low of 2%. A hold would potentially stimulate further business investment into the economy, something which it is undeniably very much in need of, and would certainly prompt something of a resurgence for the currency.
Into tomorrow night, significant New Zealand Dollar movement could occur as the GlobalDairyTrade auction takes place. Setting a reference price for the global dairy market, the auction will provide investors with a clearer picture of the current value of New Zealand’s major export, and thus its current economic health as a whole. A lowering of prices will only damage the ‘Kiwi’, although should expectations be bucked a strong rally would be inevitable.
Further ahead in the week, employment data for New Zealand could also be set to shift exchange rates back in the favour of the ‘Kiwi’. However, with equivalent releases due out from Australia, in addition to Retail Sales, Balance of Trade and further PMIs there may be plenty of chances for the ‘Aussie’ to strengthen and gain back some of the loses of the last month. Should the positive turnout of this morning fail to be replicated though the AUD/NZD pairing may well continue in its current downtrend unimpeded.
Currently the AUD/NZD exchange rate is trending down in the region of 1.1017 as the NZD/AUD pairing is making gains around the range of 0.9070.
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