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The Australian and New Zealand dollars ended up mixed last week, reflecting the divergence in monetary policy between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ). The RBA plans to keep interest rates unchanged, while the RBNZ now announces that the next move in its official cash rate (OCR) will be down. The Australian dollar was also buoyed by optimism over a US-China trade deal and a rise in domestic retail sales. The Australian and Kiwi reacted little to mixed US economic data last week.
Last week, the AUD / USD stood at 0.7105, up 0.0009 or + 0.12% and the NZD / USD at 0.6735, down 0.0071 or -1.05 %.
US-China negotiations continue to move towards a trade deal
Trade negotiations between the United States and China continue to lead to an agreement ending the trade dispute that has lasted for more than a year. President Trump said on Thursday that the two countries were seeking an agreement in the next four weeks, without announcing a long-awaited summit with Chinese President Xi Jinping. Trump also warned Beijing that it would be difficult to let the trade continue without a pact.
The week ended with Chinese Vice Premier Liu He, saying that a new consensus had been reached between Beijing and Washington on US-Chinese trade, Chinese official Xinhua media reported on Friday.
RBA fails to reverse expectations for rate cuts
The sellers hit the Australian dollar on Tuesday after the Reserve Bank of Australia's monetary policy statement and comments by RBA governor Philip Lowe failed to convince traders that a rate cut was not expected later in the year. The RBA has maintained its benchmark rate unchanged at 1.5% since August 2016. Policy makers also maintained a neutral policy bias, while hinting that it was not considering a short-term change. term. However, several signs of weakness, including slow growth and low inflation, have offset the strength of the labor market, giving traders many reasons to believe that lower buyback rates may be warranted in the future.
In other news
Some economists claim that the RBNZ will remove the OCR twice this year, the first starting as early as May. others do not expect a rate cut before August. This means that the interest rate gap between the two countries will shrink. In their most recent strategic meetings, the RBA's money rate was currently 1.5%, while the RBNZ's rate was 1.75% – the lowest level ever since November 2016.
Weekly forecasts
There is no major event in New Zealand this week, but traders have received their order of march from the RBNZ.
In Australia, investors will have the opportunity to react to Westpac Consumer Sentiment and the RBA's Financial Stability Review. In addition, RBA Deputy Governor Debelle is scheduled to speak. Traders could focus mainly on trade negotiations between the United States and China.
In the United States, investors will have the opportunity to respond to key US economic reports, including the Consumer Price Index, the Producer Price Index, and the minutes of Federal Open meetings. Market Committee. A large number of FOMC members also need to speak.
Traders will pay particular attention to CPI data, particularly because of the decline in average hourly wages in the United States. The economy is expected to remain stable, but the Fed is unlikely to move up a gear if inflation continues to fall.
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