AUD/USD and NZD/USD

AUD/USD and NZD/USD Fundamental Weekly Forecast – Expectations of More Stimulus from Fed is Supportive News

The Australian and New Zealand Dollars posted solid gains last week as optimism about a vaccine-driven global recovery led the currencies to their highest levels in months and put the Kiwi Dollar on track for a monthly gain of over 6%. The Aussie is headed toward a 5.1% gain in November, its largest monthly gain since April.

Demand for higher risk currencies was the primary reason for the rally as investors bet on vaccine hopes and while President-elect Joe Biden received approval from the government to begin his transition into the Whitehouse. The Kiwi was also helped by investors scaling back expectations for more policy easing given the risk of surging house prices.

Last week, the AUD/USD settled at .7386, up 0.0081 or +1.11% and the NZD/USD finished at .7025, up 0.0093 or +1.34%.

Weekly Outlook

This week, investors expect data on Wednesday will show Australia’s economy has rebounded sharply from its first recession in three decades, according to a Reuters poll.

They will also keep an eye on commentary from the Reserve Bank of Australia, which is expected to hold its cash rate at a historic low of 0.1% on Tuesday.

All eyes will also be on the U.S. monthly employment report on December 4, with economists polled by Reuters expecting unemployment to dip to 6.8% from 6.9%, but to remain above the 4.5% rate in March, before much of the U.S. economy went into lockdown.

A weak report is likely to put pressure on Congress to pass a new stimulus bill, but that next package is now expected only after Biden is sworn in on January 20.

Traders expect the jobs report to reinforce expectations of a setback in the U.S. recovery as several states instituted shutdowns to prevent the spread of the virus. This is leading to speculation that the Fed may increase its government bond purchases or adjust the maturity of bonds purchased.

The Fed minutes released last Wednesday confirmed that policymakers in November discussed how the central bank’s asset purchases could be modified to maximize support for the economy.

Additional monetary stimulus is likely is expected to weigh on U.S. interest rates which should make the Aussie and Kiwi more attractive assets.

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

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.