AUD NZD Advances as Chinese Trade Impresses
The AUD NZD exchange rate looks to end the week near its best levels since November 2016 as this week’s Reserve Bank of New Zealand (RBNZ) news holds back the ‘Kiwi’ while the Australian Dollar benefits from RBA news and strong Chinese data. The Australian Dollar to New Zealand Dollar exchange rate has advanced from 1.05 to over 1.06.
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Australian Dollar (AUD) Benefits from Chinese Data and Optimistic RBA
Despite slipping earlier in the week on profit-taking, lower demand for risk-correlated currencies and mixed economic data, the Australian Dollar has largely been able to hold its recent highs quite comfortably due to strong underlying factors like Reserve Bank of Australia (RBA) hopes and trade news.
This week saw the RBA take up an optimistic tone on the monetary policy outlook and its minutes report published on Friday went into further detail.
The RBA expects the Australian economy to bounce back from its Q3 2016 contraction and grow 3% in 2017, followed by 3.25% in 2018. Investors also relaxed into the ‘Aussie’ as RBA Governor Philip Lowe indicated the bank did not believe the Australian Dollar to be overvalued at its current levels.
In trade news, this week’s Chinese trade data came in strongly with imports, exports and the nation’s trade balance coming in well above expectations.
Chinese iron ore imports had also been their second highest on record in January, bolstering demand for Australia’s most lucrative commodity. Iron ore prices reached their best levels since October 2014 overnight, cementing this week as a win for the Australian Dollar.
New Zealand Dollar (NZD) Weakened by Reserve Bank of New Zealand (RBNZ) Dovishness
Demand for the New Zealand Dollar weakened towards the end of the week.
This week’s New Zealand data has been relatively light and unable to keep the ‘Kiwi’ supported amid a dovish stance from the Reserve Bank of New Zealand (RBNZ) in its first policy decision of 2017.
The RBNZ indicated that monetary policy would be left frozen for some time to come. While the week’s Chinese trade data was good news for New Zealand trade too, investors favoured the ‘Aussie’ this week due to the ‘Aussie’s numerous supportive factors.
AUD NZD Exchange Rate Forecast to Hold Highs if Australian Employment Impresses
Next week will be another relatively quiet one for Australian and New Zealand data.
Demand for risk-correlated currencies is likely to fall if US President Trump announces new tax policies as investors hope he will. This will leave AUD/NZD jittery as both currencies weaken.
The Australian data set for publication throughout the week includes the NAB’s January business confidence results, Westpac’s February consumer confidence figures and on Thursday, January’s key Australian employment results.
Employment remains a mixed part of Australia’s economic activity in recent months despite the optimism of the Reserve Bank of Australia (RBA). If the employment report impresses traders the RBA is even more likely to edge towards a tightening bias.
As for New Zealand data, NZ retail sales and manufacturing figures will be published on Friday. Besides that, the New Zealand Dollar is likely to be influenced by other major currencies and could recover from its recent declines.
If prices of iron ore remain as strong as they have been however, the Australian Dollar may be a tough rival to beat.
AUD NZD Interbank Rate
At the time of writing, the Australian Dollar New Zealand Dollar exchange rate trended in the region of 1.06, while the New Zealand Dollar Australian Dollar exchange rate traded at around 0.93.