Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Look for Yellen to Reiterate Fed Rate Hike Plans
In a volatile trading session, the Australian and New Zealand Dollars are trading mixed against the U.S. Dollar, but intraday momentum suggests they are both headed lower into today’s session close.
The NZD/USD started the session steady following a government report that showed New Zealand’s trade surplus narrowed more than expected in May.
According to Statistics New Zealand, the merchandise trade balance narrowed to NZ$103 million in May, from a revised $536 million surplus the month before. Analysts were looking for a surplus in the neighborhood of about NZ$420 million.
The May results show the country has run a trade surplus for three consecutive months. In April, the surplus reached its highest level since 2015.
The report also showed the annual trade deficit is now $3.75, up from a revised $3.51 billion in April. Annual exports came in at $4.95 billion, up from $4.70 billion. Imports also rose sharply to reach $4.85 billion compared to year-ago levels.
There were no reports out of Australia, so the AUD/USD had to rely on a weaker U.S. Dollar for upside momentum.
Both the AUD/USD and NZD/USD surged to their highs for the day after European Central Bank President Mario Draghi sounded hawkish in a speech earlier in the session. This news drove the U.S. Dollar against the Euro in a move that spread across all Forex markets.
The Aussie and Kiwi couldn’t sustain their strong gains, however, as the thought of a possible rate hike by the ECB in the future weighed on both currencies because their respective central banks are still neutral towards a rate hike.
The AUD/USD and NZD/USD continued to weaker later in the session after the U.S. Richmond Manufacturing Index and the Conference Board’s Consumer Confidence report came in better than expected.
The U.S. Dollar strengthened against the Aussie and the Kiwi at the mid-session after FOMC Member Patrick Harker remained hawkish about the direction of U.S. interest rates in 2017.
“I’m sticking to my outlook that we’re on the right path,” Harker told the European Economics and Financial Centre in London, according to prepared remarks. “In the case of inflation, I’ve seen the factors exerting downward pressure as temporary.”
“I still support the continued gradual removal of accommodation,” Harker said. “I still see another rate hike as appropriate for 2017.”
Next on tap at 1700 GMT is Fed Chair Janet Yellen. She is hawkish so I don’t think she is going to say anything to contradict the comments from FOMC Member Patrick Harker. She is likely to reiterate that the Federal Reserve plans to raise U.S. interest rates once more this year given recent inflation weakness is likely temporary.
If Yellen is hawkish in her commentary then look for U.S. Treasury yields to rise, making the U.S. Dollar a more attractive investment. This would put further pressure on the Australian and New Zealand Dollars into the close.
This article was originally posted on FX Empire
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