Tensions Over US Inflation Rates Leave AUD/NZD Exchange Rate Close
The Australian Dollar has traded in a narrow range against the New Zealand Dollar (AUD/NZD) today, owing to trader uncertainty about upcoming US economic news.
The data in question pertains to US inflation rates; the stats could have a major impact on the US Dollar and by extension the Australian Dollar and New Zealand Dollar.
With that in mind, AUD traders are holding off on investing in the currency, given that exchange rates could change dramatically in the future.
Fears for Reduced Iron Ore Demand Leave AUD/NZD Exchange Rate Tight
As well as worries about the US reducing demand for the Australian Dollar, the currency has also fallen because of fears for disrupted iron ore exports.
Australia has a long-established relationship of trading the mining product with China, as the latter country uses it extensively in the steel manufacturing process.
Problematically, the Chinese government’s efforts to reduce air pollution often involve the shutdown of steelmakers, which means reduced demand for iron ore.
Amid reports that north Chinese ports are already at full capacity with their iron ore stockpiles, traders are concerned that demand will dry up.
According to Australia’s Department of Industry, Innovation and Science, there are official worries about iron ore prices and demand as well;
‘The iron ore price is expected to experience some ongoing volatility in early 2018, as the market responds to uncertainty regarding the impact of winter production restrictions on iron ore demand’.
Rising Building Permits Fail to Shift New Zealand Dollar to Australian Dollar (NZD/AUD) Exchange Rate
A sharp rise in building permits hasn’t been enough to move the New Zealand Dollar today, which remains in close contest with the Australian Dollar (NZD/AUD).
November’s NZ permits data showed a recovery from a -10.4% decline in October to 10.8% growth, which hints at an increase in national construction activity.
Looking at the data in detail, Construction Statistics Manager Melissa McKenzie said;
‘November’s rebound in home consents was driven by apartments, which tend to fluctuate a lot and were particularly low in October.
Looking at the longer-term picture, building consents for apartments and townhouses have seen double-digit growth year after year, while consents for stand-alone houses have levelled off’.
Australian Dollar to New Zealand Dollar Forecast: US Inflation Slowdown could Boost AUD and NZD
As mentioned above, the Australian Dollar and New Zealand Dollar may not see significant movement today until the US’s December inflation data comes out.
If this slows as expected, the US Dollar could fall in value; this would open the door to an Australian Dollar and New Zealand Dollar appreciation.
Lower US inflation reduces the chances of a near-term US interest rate hike, which would disappoint US Dollar traders who are hoping for three or four rate hikes in 2018.