Australian Dollar Slips Against ‘Kiwi’ Despite Bullish Australian GDP
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate slipped on Wednesday as a bout of profit-taking took the ‘Aussie’ down from its morning highs. Highly optimistic domestic GDP initially boosted the ‘Aussie’, but the New Zealand Dollar won out.
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Investors Impressed by Australian Growth Data
Wednesday’s session followed up Tuesday’s session with a surprisingly strong Q1 Gross Domestic Product (GDP) report, which briefly sent the ‘Aussie’ soaring.
AUD/NZD climbed to a high of 1.0738 as a result of the GDP report, but due to ongoing pressure on the Australian Dollar and a market focus on the US Dollar, the pair fell around -90 pips to trend around levels of 1.0640 as investors indulged in a bout of profit taking.
Tuesday’s data gave the Australian Dollar its first major boost of the week when a surprisingly strong net exports of GDP report was released. The figure improved from 0.00 to 1.10, surpassing the expected 0.70 and leaving investors to adjust their GDP bets higher.
The bets paid off when Wednesday’s growth scores came in. Quarterly GDP improved from 0.6%, well past the projected 0.8%, to 1.1%.
Year-on-year GDP also impressed, improving from 3.0% to 3.1% despite being estimated to slow to 2.8%.
However, the ‘Aussie’ was held down despite this optimistic economic news as investors expected a strong Q1 after iron ore’s price rally earlier this year. Australia’s most lucrative commodity, iron ore, has since slipped to below US$50 per tonne and keeps pressure on the Australian Dollar.
New Zealand Dollar (NZD) Extends Gains after Strengthening Alongside ‘Aussie’
The appeal of the New Zealand Dollar was considerably bolstered by its antipodean peer, the Australian Dollar, over the first half of the week. Positive growth news for Australia improved risk-sentiment and sent the ‘Kiwi’ soaring.
However, the ‘Aussie’ began to slip against the New Zealand Dollar on profit-taking, leaving the ‘Kiwi’ stronger as AUD/NZD reached new weekly lows.
New Zealand’s data has been largely positive, with Wednesday’s terms of trade index report leaving contraction of -2.0% to score 4.4% and the QV house prices report improving from 12.0% to 12.4%.
Investors also remained more invested in the ‘Kiwi’ throughout Wednesday’s European session while the ‘Aussie’ was sold from its highs due to anticipation of the night’s upcoming dairy auction.
The results of the latest Global Dairy Trade report eventually released during the afternoon of the London trade session, indicated an increase of 3.4% and a new average price of $2,329.
While the price increased for the second consecutive session and appeared to show a slow recovery, prices still remained below 2016’s best levels from January – and well below 2015’s best levels.
Australian Dollar to New Zealand Dollar (AUD/NZD) Exchange Rate Forecast: Australian Trade Deficit Ahead
Australian traders are likely to focus on the latest updates to the Australian trade deficit in the upcoming session, which is currently expected to narrow only slightly from -2163m to -2100m.
A greater recovery than expected could see the ‘Aussie’ rallying once again as sentiment for the currency remains strong. However, as economic pressure hovers over Australia, a worse-than-expected figure could leave the ‘Aussie’ weak.
Australian retail sales are also expected, with scores tipped to slow from 0.4% to 0.3%.
New Zealand data is set to be quiet until Friday’s session, which will see the release of the latest value of all buildings report as well as the ANZ commodity price score. AiG is also expected to release its Australian performance of service index report.
As always, investors should be sure to pay attention to fluctuations in risk sentiment, as well as the price of Australia’s key commodity, iron ore. The US Federal Reserve’s attitude towards its upcoming June meeting is also likely to influence risk movement.
At the time of writing, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate trended in the region of 1.0640, while the New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate traded at around 0.9394.