AUD/NZD Exchange Rate Movement Stalled ahead of US Trade Tariff Announcement

September 6, 2018 – Written by James Fuller

Wednesday saw the Australian Dollar open trading against the New Zealand Dollar at a level of NZ$ 1.0966 and close lower around NZ$ 1.0913.

Yesterday’s headline Australian news was that the pace of GDP growth had accelerated in Q2 2018.

Despite the year-on-year rise from 3.2% to 3.4%, however, the Australian Dollar failed to gain against the New Zealand Dollar because of underlying trading concerns.

Worries about More US-China Trade Tariffs Leave AUD/NZD Exchange Rate Flat

The Australian Dollar (AUD) has traded in a narrow range against the New Zealand Dollar (NZD) today, failing to make much progress in the pairing because of ongoing trading concerns.

Today marks the last day of a public comment period for planned US tariffs against Chinese goods and services – the end of this period could be followed by these sizable tariffs being imposed and made official.

Such an announcement could come without warning and the threat of this imposition has kept Australian Dollar and New Zealand Dollar traders cautious today.

The main issue is that if the US presses ahead with its planned tariffs and China retaliates in kind then the global flow of trade could be disrupted, which might have negative repercussions for Australia and New Zealand.

In other Australian news, the Parliamentary Budget Office has cautioned that the new government’s plans to hit a budget surplus in 2021-22 depend on higher personal income taxes.

This hasn’t been an outright criticism of the Morrison administration, but has nonetheless been an early warning about the feasibility of the government’s plans for stimulating economic growth.

NZD/AUD Exchange Rate Static despite Reassuring Signs for Revised NAFTA Deal

The New Zealand Dollar NZD) has been in a similar position to the Australian Dollar (AUD) today, trading tightly in the pairing because of a lack of domestic data and concerns about US trade plans.

While the New Zealand Dollar hasn’t managed to make any real gains against the Australian Dollar, the New Zealand currency has stayed level in the pairing because of cautious optimism regarding future international trade deals.

Among other things, the prediction that Canada and the US could still tie up a renegotiated North American Free Trade Agreement (NAFTA) has done its part to reassure NZD traders.

A stable trading situation in North America can lead to steady trading conditions in other nations, although it is worth noting that a revised NAFTA agreement is not yet official.

Australian Dollar to New Zealand Dollar Exchange Rate Forecast: Are AUD/NZD Gains ahead on Rising Business Confidence?

After the dust settles from the US trading declaration, the Australian Dollar (AUD) might be able to appreciate against the New Zealand Dollar (NZD) on Tuesday next week.

The morning will bring a high-impact NAB business confidence reading for August, which is predicted to rise from 7 points to 10.

While minor, such an increase would mean that optimistic respondents outnumber pessimistic ones.

Any AUD/NZD exchange rate gains on the news could prove temporary as the week progresses, however, as Wednesday will bring a negatively-forecast consumer confidence reading.

Next week’s main piece of Australian data will be Thursday’s unemployment rate reading for August, which is predicted to show the jobless rate rising from 5.3% to 5.4%.

Higher unemployment would reduce the odds of a near-term Reserve Bank of Australia (RBA) interest rate hike, so could lead to AUD/NZD exchange rate losses.

There will only be two notable data releases from New Zealand in the near-future – Sunday’s manufacturing sales measurement and Thursday’s manufacturing PMI reading.

The sales reading, covering year-on-year activity in Q2 2018, could cause early NZD/AUD exchange rate gains next week if it reveals growth from 3.1% to 4.5% as forecast.

There may be similar support for the New Zealand Dollar late next week, assuming that Thursday’s business NZ PMI reading matches expectations by rising from 51.2 points to 52.99.

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TAGS: Australian Dollar Forecasts