Supply closures from Hurricane Francine which is ravaging the Gulf of Mexico are another bullish factor. WTI is forming short-term bullish reversal patterns on the daily and weekly charts. USD/JPY remains under some selling pressure on Friday and hits a fresh YTD low. The divergent Fed-BoJ policy expectations continue to weigh heavily on the pair. Investors look to Fed and BoJ meetings next week for a fresh directional impetus. The Australian Dollar (AUD) received support as the Reserve Bank of Australia (RBA) Governor Michele Bullock has maintained a hawkish outlook, saying last week that it is too soon to consider rate cuts as inflation remains too high.
This would help the NZD to appreciate against other currencies on narrowing yield outlooks,” said KCM’s Waterer. Another factor to consider is the impact of the technical recession in New Zealand. A deteriorating domestic economy could prompt global investors to seek more stable assets, leading to a weaker Kiwi trade99 review dollar. Recessionary conditions could also prompt the RBNZ to bring forward its timeline for cutting rates, making the currency less attractive to foreign investors.
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The pair are correlated given the similar position of both countries as commodity exporters, and typically trade in a similar way against other global currencies. Both are also suited to “risk-on” trade, thanks to each country’s high exposure to commodities exports to China and a sensitivity to global growth. The Australian (AUD) and New Zealand dollars (NZD) are two of the most-traded currencies in the global forex markets. The AUD/USD pair, also called the “Aussie”, tells the trader how many US dollars (the quote currency) are needed to purchase one Australian dollar (the base currency). Together with the New Zealand Dollar and the Canadian Dollar, the AUD is a commodity currency, that is a currency whose country’s exports are largely comprised of raw materials (precious metals, oil, agriculture, etc.). WTI Oil is rebounding off four-month lows on renewed expectations the Fed may cut interest rates by 50 bps.
Gold preserves its bullish momentum and trades near $2,580 after setting a new record-high slightly above this level. The 10-year US Treasury bond yield stays in the red below 3.7% as markets reassess the odds of a large Fed rate cut, helping XAU/USD push higher. The Australian dollar’s performance has largely been framed against a weakening global economy and central bank action in lifting rates. Providing access to our stories should not be construed as investment advice or a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction by Forbes Advisor Australia. In comparing various financial products and services, we are unable to compare every provider in the market so our rankings do not constitute a comprehensive review of a particular sector.
- That trend was underscored after the RBA, by contrast, lifted its cash rate in Australia on June 6—and his continued to speak of a potential need for more tightening of monetary policy.
- In the financial world, gold is viewed as a safe haven against inflation and it is one of the most traded commodities.
- While we do go to great lengths to ensure our ranking criteria matches the concerns of consumers, we cannot guarantee that every relevant feature of a financial product will be reviewed.
- A deteriorating domestic economy could prompt global investors to seek more stable assets, leading to a weaker Kiwi dollar.
- That variation has been evident over the last year, with the combination bouncing between 1.05 and 1.15 over that period.
EUR/USD clings to gains near 1.1100 as USD struggles to rebound
According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The likelihood of a 50 bps rate cut has sharply increased to 41.0%, up from 14.0% a day ago. The AUD/USD pair appreciates as US data reinforce the likelihood of an aggressive Fed rate cut next week. The US Producer Price Index rose above expectations, driven by higher service costs.
Investors shift their focus to the Michigan Consumer Sentiment Index, which is scheduled for Friday. Bitcoin trades above $58,000 at the time of writing, adding 2% to its value this week. Ethereum hovers around $2,300 as WazirX exchange exploiter moves 5,000 Ether to a new wallet address and a crypto mixer. Another important factor would be an improvement in trade and economic conditions.
Most analysts expect the Australian dollar to strengthen against the NZD over the next few months because the RBA is continuing to lift rates, or has not ruled them out, whereas the RBNZ has called an end to its rate hikes. The resulting yield differential could lift the AUD/NZD rate to 1.12 from 1.09 now. Just a day later, the surprise RBNZ announcement that it was done with rate hikes completely reversed the momentum. That trend was underscored after the RBA, by contrast, lifted its cash rate in Australia on June 6—and his continued to speak of a potential need for more tightening of monetary policy.
About Australian Dollar / New Zealand Dollar
Fed is expected to deliver a 25-basis points interest rate cut at its September meeting. One key factor determining the AUD/NZD rate over a longer term will be the inevitable end to central bank tightening globally. The AUD has underperformed against most of its developed world peers as the Reserve Bank of Australia has lifted rates at an easier pace than other central banks, widening the differential in interest rates. An immediate reason has been the New Zealand’s central bank unexpectedly signaling in May that no further policy tightening will be needed to tame inflation, after it lifted the cash rate to a steep 5.5%. Still, the gap narrowed mid-year after the Australian central bank aafx trading review underlined its inflation-fighting intention by lifting rates by a quarter percentage point in June to an 11-year high of 4.1%, and warned that further tightening may be required.
Despite a sharp rise in June, the AUD/NZD pair is currently trading midway through the range.
The AUD/USD extends its upside for the third successive session on Friday as economic data from the United States (US) reinforced the possibility that the Federal Reserve (Fed) could lower interest rates by 50 basis points next week. The European Central Bank is expected to cut key rates by 25 bps at the September policy meeting. ECB President Christine Lagarde’s presser and updated economic forecasts will be closely scrutinized for fresh policy cues.
The currency clawed back some of its steep declines during the final two months of 2023, and the outlook seems sunnier in the wake of the prevalent bearish sentiment surrounding the Greenback. The US Labor Department reported that Initial Jobless Claims for the previous week increased as anticipated, surpassing the previous week’s figures. Additionally, US factory inflation rose above expectations, driven by higher service costs.
AUD to NZD Exchange Rate
While Australia is currently experiencing favourable conditions for its minerals-heavy export basket, New Zealand’s agri-focused export performance has not been as good because of lacklustre conditions in the Chinese market. In the short term, analysts expect the AUD/NZD rate to rise to 1.12, largely because the RBA’s hawkish-for-longer stance will boost the appeal of the Australian dollar. The New Zealand dollar has been among the weakest performing major currencies in 2023, with the persistent downtrend attributable to several key factors. That variation has been evident over the last year, with the combination bouncing between 1.05 and 1.15 over that period.
While we do go to great lengths to ensure our ranking criteria matches the concerns of consumers, we cannot guarantee that every relevant feature of a financial product will be reviewed. However, Forbes Advisor Australia cannot guarantee the accuracy, completeness or timeliness of this website. The current market pricing for a more aggressive policy easing by the central bank next year might have already set the stage for a disappointment and favours the USD bulls. This should allow the USD to resume the prior uptrend witnessed since July 2023 and keep a lid on a runaway rally for the AUD/USD pair. “Longer term, other central banks including the RBA will need to call a halt to the rate hiking cycle, similar to where the RBNZ is now.
This correlation with the Shanghai stock exchange is to be added to the correlation it has with gold. In the financial world, gold is viewed as a safe haven against inflation and it is one of the most traded commodities. Rising investor concerns about the risk to global growth have also played a role in the prolonged weak performance of the local currency, given the potential risk to Australia’s exports. However, global equities and other risk-assets have staged a recovery in recent months, allowing the AUD to make up some ground. Despite this, the AUD and NZD often display high levels of volatility against each other, offering lucrative opportunities for traders. The Australian Dollar (AUD) started 2023 on a high note, though slumped closer to its post-pandemic low against the USD during the latter part of the year.