AUD/USD and NZD/USD Fundamental Daily Forecast – US ADP Report Should Set the Tone Today
The Australian and New Zealand Dollars are trading mixed on Wednesday as investors weigh fresh domestic economic data against concerns over a global economic slowdown and a slew of European and U.S. data due later today. Investors in both currencies are also considering the possibility of future rate cuts by their respective central banks as well as the strong probability of rate cut by the European Central Bank and U.S. Federal Reserve in July.
At 07:32 GMT, the AUD/USD is trading .6992, down 0.0002 or -0.03% and the NZD/USD is at .6678, up 0.0006 or +0.10%.
Australian Dollar
On Tuesday, traders had a chance to react to the RBA’s latest interest rate decision and monetary policy statement. Earlier today, it was domestic data on Building Approvals and the Trade Balance that were their major concerns.
The Australian Bureau of Statistics said on Wednesday that building approvals rose by 0.7 percent in May as apartment growth ended a two-month run of declines.
Approvals for private sector houses fell a seasonally adjusted 0.3 percent in the month, but the “other dwellings” category that includes apartment blocks and townhouses, rose 1.2 percent to lift the overall figure. Over the 12 months to May, total building approvals for dwellings fell by 19.6 percent.
Traders don’t expect the RBA’s back-to-back rate cuts to be seen in approvals figures for some time.
Additionally, Australia’s trade surplus hit a record $5.7 billion in May after a $925 million monthly rise driven entirely by iron ore exports to China.
The $5.75 billion surplus was up 19 percent in seasonally adjusted terms, the Australian Bureau of Statistics said on Wednesday, and it handily beat expectations of a $5.25 billion surplus.
New Zealand Dollar
In New Zealand, traders are responding to a weak business confidence report. The latest NZIER Quarterly Survey of Business Opinion (QSBO) shows business confidence fell to its lowest level since March 2009, with a net 31 percent of businesses expecting a deterioration in general economic conditions over the coming months.
Additionally, Statistics New Zealand reported that the number of building consents rose 13% in May after falling 7.9% in April.
Daily Forecast
The early trading ranges are tight, but volatility could hit the Forex market later in the session with the release of several U.S. reports that could have an impact on Fed policy later in the month. At 12:15 GMT, investors will get the opportunity to react to the ADP Non-Farm Employment Change report. It is expected to show the private sector of the economy added 140K jobs in June. A report on ISM Non-Manufacturing PMI is expected to come in at 56.1, slightly below the previously released 56.9. This report will be released at 14:00 GMT.
The ADP report is likely to generate the biggest reaction by investors because it is often used as a proxy for Friday’s U.S. Non-Farm Payrolls report. A better-than-expected number could dampen the chances of a July Fed rate cut.
Basically, stronger-than-expected U.S. data is likely to put pressure on the AUD/USD and NZD/USD.
This article was originally posted on FX Empire
