AUD/NZD Exchange Rate Rallied on Stronger Australian Employment
After rallying on the latest Australian employment data the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate is predicted to see fresh volatility as a result of the first quarter Chinese GDP.
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Disappointing Consumer Confidence Prompted AUD/NZD Exchange Rate Downtrend
Despite a better-than-expected improvement visible in the latest Chinese trade data the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate trended lower on Wednesday. While Chinese exports rose by a not-inconsiderable 18.7% on the year in March this failed to excite particular demand for the ‘Aussie’ (AUD). Some were inclined to dismiss the more bullish result, highlighting the fact that the world’s second largest economy remains on a slowing bias, while speculation of an April rate hike from the Fed weighed on general sentiment.
Support was lacking for the Australian Dollar as the Westpac Consumer Confidence Index demonstrated weakness, declining by -4% on the month as domestic sentiment softened. This undermined recent confidence in the outlook of the Australian economy, allowing the ‘Kiwi’ (NZD) to make strong gains against its antipodean rival.
Currency War Fears Weigh on New Zealand Dollar (NZD)
This New Zealand Dollar uptrend was not ultimately long-lived, however, as the risk-sensitive currency was abruptly weakened due to the Monetary Authority of Singapore’s (MAS) surprise decision to ease monetary policy. This move raised concerns that the Asia-Pacific region could be dragged back into a currency war due to competitive devaluations, a prospect that has weighed heavily on the ‘Kiwi’.
Confidence in the ‘Aussie’, on the other hand, returned on Thursday as the latest raft of domestic employment data bettered expectations. Australia’s Unemployment Rate dipped back to 5.7%, a relief to investors who had anticipated an uptick to 5.9% in March. This stronger showing helped to somewhat dispel concerns that the Reserve Bank of Australia (RBA) could move towards a greater easing bias in the near future, thus bolstering demand for the Australian Dollar.
AUD/NZD Exchange Rate Forecast: Weaker Chinese GDP to Dent ‘Aussie’
Ahead of the weekend the AUD/NZD exchange rate is expected to take its cues from the first quarter Chinese GDP report. While markets are anticipating a dip in growth the bullishness of recent data has raised hopes of a healthier print. On the year GDP is forecast to have slowed from 6.8% to 6.7%, a fresh sign of slowdown pressures dragging on the world’s second largest economy. However, if growth does not retreat the Australian Dollar could be boosted further on the back of increased risk appetite.
Also of note will be the University of Michigan Confidence Index, which could add new fuel to speculation of an imminent Fed rate hike if consumer sentiment is shown to have strengthened. A bullish result here is likely to dent the New Zealand Dollar in particular, given the current dovishness of the Reserve Bank of New Zealand (RBNZ).