Hawkish Fed Minutes Prompt AUD/NZD to Slide
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate tumbled on Thursday as markets reacted to the minutes from the Federal Reserve’s latest policy meeting.
At the time of writing AUD/NZD is trending narrowly, after previously slumping 0.5% during Asian trading.
Australian Dollar (AUD) Tumbles on Hawkish Fed Minutes
The Australian Dollar fell heavily against both the New Zealand Dollar and most of the other majors on Thursday, following the release of the minutes from the Fed’s January policy meeting.
The release of the minutes saw market risk appetite nosedive, with investors flocking to the US Dollar (USD).
This came due to observers interrupting the minutes as a sign that policymakers are likely to support the idea of accelerating the pace of monetary tightening this year.
A key section of the minutes read;
‘A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate.’
It is also worth noting that this meeting was held before the release of the latest US CPI figures, which is expected to have further reinforced the hawkish outlook from the bank.
Card Spending Figures Weigh on New Zealand Dollar (NZD)
The New Zealand Dollar meanwhile appeared to show a little more resilience than its antipodean cousin on Thursday despite the broad-based drop in market risk sentiment.
However the ‘Kiwi’s gains came to a grinding halt later in the session as New Zealand published its latest Credit Card Spending figures.
According to data published by the Reserve Bank of New Zealand (RBNZ) card spending contracted 0.6% in January after previously climbing 0.6% in December.
This suggests that overall consumer spending is likely to have dipped at the start of the year, and prompted NZD to cede some ground.
AUD/NZD Forecast: Uptick in Retail Sales to Bolster the ‘Kiwi’?
Looking ahead the AUD/NZD exchange rate may begin to retreat again at the start of Friday’s session following the release of New Zealand’s latest Retail Sales figures.
Economists forecast that tomorrow’s data will show that sales growth rebounded from 0.2% to 1.4% in the fourth quarter, likely prompting the New Zealand Dollar to strengthen.
Meanwhile the Australian Dollar may be left to drift for the remainder of this week as a lull in domestic data is likely to leave the ‘Aussie’ with little momentum to propel it forward.