AUD NZD Exchange Rate Trends Higher ahead of Fed Meeting Minutes
Australian Dollar (AUD) Continued to Benefit from Commodity Uptick
Risk appetite remained generally elevated on Wednesday, offering support to both the Australian Dollar (AUD) and New Zealand Dollar (NZD). In spite of stronger-than-expected US data the US Dollar (USD) remained on a weaker footing, to the benefit of the commodity correlated currencies. Positive Chinese data also helped to shore up the ‘Aussie’, with base metal prices boosted by the resilience of the world’s second largest economy and hopes of increased infrastructure investment to come in the US.
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The Australian Dollar New Zealand Dollar (AUD NZD) exchange rate was encouraged to trend higher by the disappointing results of the latest GlobalDairyTrade auction. A -3.9% dip in dairy prices put renewed pressure on the ‘Kiwi’, given the importance of the industry within the New Zealand economy. This renewed weakening in prices did not get the year off to a good start for the New Zealand Dollar, particularly as the currency is considered to be somewhat overvalued at present.
AUD NZD Exchange Rate Forecast: Weaker Services PMI Could Dent ‘Aussie’
This morning’s Australian Services PMI could put an end to the current uptrend of the AUD NZD exchange rate, though. Forecasts point towards a sharp loss of momentum within the sector, with the index expected to drop from 51.1 to 50.2, just shy of entering contraction territory. A poor showing like this would not offer particular confidence in the strength of the domestic economy, raising the prospect of the Reserve Bank of Australia (RBA) being prompted to return to an easing bias.
Demand for the New Zealand Dollar could also decline in response to the Federal Open Market Committee’s (FOMC) December meeting minutes, which may prompt a resurgence for the US Dollar. If policymakers indicate a willingness to tighten monetary policy at a faster pace then the AUD NZD exchange rate could soften. Either way, market risk appetite is expected to remain volatile ahead of the weekend in anticipation of the US Non-Farm Payrolls report.
An absence of fresh New Zealand data will leave the ‘Kiwi’ more vulnerable to shifts in the mood of investors throughout the remainder of the week.