AUD/USD and NZD/USD Fundamental Daily Forecast – Air of Caution as Doubts Over Stimulus Package Resurface

James Hyerczyk
·2 min read

The Australian and New Zealand Dollars are trading mixed on Thursday after posting strong short-covering rallies the previous session. Both the Aussie and the Kiwi were underpinned by hopes for a fresh U.S. fiscal stimulus deal after President Trump and House Speaker Nancy Pelosi sounded optimistic about the chances for a large coronavirus aid package.

At 10:15 GMT, the AUD/USD is trading .7095, down 0.0022 or -0.31% and the NZD/USD is at .6661, up 0.0006 or +0.09%.

Latest Stimulus News

There seems to be an air of caution in the Forex markets early Thursday with the U.S. Dollar holding steady against a basket of major currencies as hopes of a fiscal package in the United States ahead of the November elections crumbled once again.

Progress towards a U.S. stimulus deal boosted sentiment for higher risk currencies throughout the week, but pressure is returning on Thursday after Trump on Wednesday accused Democrats of being unwilling to craft an acceptable compromise.

No Reports, but RBA Official Ducks Questions on Monetary Policy

There were no major economic reports out of Australia or New Zealand on Thursday but Reserve Bank of Australia (RBA) deputy governor Guy Debelle steered clear of discussing interest rates during a speech on foreign exchange.

His address comes at a time of heightened speculation the RBA could further ease monetary policy as early as next month.

Last month, Dr. Debelle sparked talk of a rate cut during a speech which laid out the various options the RBA has at its disposal, should it wish to further stimulate the recovery from recession.

RBA governor Philip Lowe has since said a policy change would gain more traction as coronavirus restrictions are lifted.

Dr. Debelle, who chairs the Global Foreign Exchange Committee, refused to take questions about other topics on Thursday.

Short-Term Outlook

Over the short-run, the Aussie and the Kiwi may not move lock-step. When the greenback is weak and risk appetite is strong, the two currencies will likely move in the same direction, but that will be the extent of the correlation because the RBA is likely to cut rates in about two weeks, while the RBNZ is likely to make their rate cut to negative in early 2021.

Economists expect the RBA to cut the cash rate from 0.25 percent to 0.10 percent at the RBA’s next board meeting.

They also expect reductions to its three-year bond target rate and the term funding facility for banks. Additionally, there is speculation the RBA could start buying longer-term bonds to keep market interest low while pumping liquidity into the finance system.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire