AUD Exchange Rates Limited as Risk Aversion Rises Ahead of US Fed Speeches
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate climbed on Friday, ultimately proving the more resilient of the two currencies in reaction to surging optimism for the US Dollar (USD).
Nonetheless, the ‘Aussie’ Dollar’s upward potential continues to be limited by a number of variables.
The devil was in the details in Thursday’s wage growth readings: Whilst wage growth was, admittedly, above forecast, private sector wage growth barely managed to keep up with Australia’s inflation rate – an understanding that left the news rather sour in the mouth for the markets.
Beyond this, the news seems to have put to bed the possibility of the RBA moving hawkishly in the medium-term, with markets asserting that until wage growth picks up sufficiently, it is unlikely that inflation will follow suit.
The largest limiting factor remained the performance of the US Dollar, however, with, with optimism continuing to climb on the prospect of 4 rate hikes this year, rather than 3.
This is due to slowly accelerating wage growth in the US, higher-than-expected inflation readings and the robust performance of the US private sector – with optimism soaring amongst businesses and consumers on the back of US President Donald Trump’s sweeping tax reform measures.
As a result markets have become slightly risk averse, particularly with today featuring the US monetary policy report as well as a number of speeches from Fed Presidents.
NZD Exchange Rates Tumble in Response to Disappointing NZ Credit Card Spending
New Zealand Dollar (NZD) exchange rates were largely limited on Friday, falling as markets grew increasingly risk averse but also dropping on some disappointing NZ credit card spending figures.
According to statistics New Zealand, credit card spending growth fell to 4.6% in January, down from the revised 6.2% seen in December and marking the weakest growth in the past 3 months.
This underlined the possibility that retail sales in the nation could be weak – with the two closely correlated with consumer spending – and also pointed to the possibility of lacklustre economic growth for the start of 2018.
Whether this will continue, however, remains to be seen, particularly with the ‘Kiwi’ Dollar seeing some support in recent days from news that the renewed trans-Pacific partnership deal could provide up to 1% more growth in GDP for the nation.
It should be stressed, however, that the new deal is not yet written in stone, with many of the 11 nations yet to individually ratify the agreement.
AUD/NZD Exchange Rate Forecast: Pertinent Data Events in the Week Ahead
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate could see some volatility next week on the back of a variety of data releases, including the New Zealand trade balance reading for January – expected on Monday, and Australia’s private sector credit reading – expected Wednesday.
Beyond this, markets will be keeping a keen eye on New Zealand’s new Labour-led leadership, with investors still skittish at the possibility that new policy measures or approaches could limit growth for the nation.
The performance of the US Dollar will also be an ongoing driver, with the US GDP reading for the Q4 2017 (expected Wednesday) liable to raise, or lower market risk appetite, depending on its performance.