AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Anticipating Slower Economic Growth in China, Global Economy
The Australian and New Zealand Dollars are under pressure on Friday in response to an escalation in trade tensions between the United States and China. The Aussie is grinding toward its low of the year at .6764, while the Kiwi is rapidly approaching its June 14 bottom at .6487. This is slightly above a pair of bottoms from October 16, 2018 at .6465 and October 8, 2018 at .6424.
At 08:08 GMT, the AUD/USD is trading .6802, unchanged. Earlier in the session, it reached a low of .6794. The NZD/USD is at .6530, down 0.0024 or -0.37%.
Your capital is at risk
On Thursday, the AUD/USD closed 0.65% lower. For the week, it’s down 1.57%. The NZD/USD finished 0.14% lower. It’s down 1.28% lower.
The plunge was fueled by a series of tweets from U.S. President Donald Trump that said the United States will impose additional 10 percent tariffs on $300 billion of Chinese imports entering the country from September 1, adding to the 25 percent tariffs on $250 billion in imports already in place.
In a press conference later in the day, Trump went even further and warned that tariff levels could go “well beyond” 25 percent.
The decision to impose new tariffs came just a day after the latest trade negotiations between the United States and China wrapped up in Shanghai without any major progress toward a trade deal.
U.S. Treasury plunged on the news which means the financial markets are already fully pricing two additional 25-basis point rate cuts by the Fed this year.
In economic news, Australian Retail Sales rose 0.4%, better than the 0.3% forecast and the quarterly Producer Price Index came in at 0.4%, higher than the 0.2% forecast
The Australian Dollar showed little response to the reports because they represent the past, while the new tariffs on China represent the future. Furthermore, it looks like Reserve Bank Governor Philip Lowe has another reason for leaving rates at historically low levels for a long time.
Daily Forecast
There is no forecast, per se, because the heightened volatility has created two-sided trading opportunities. The real trade will start once the dust from the Fed, Trump and the jobs report clears.
Traders are now bracing for a big day on the economic front although these reports aren’t likely to matter much to the Fed, given the impact of the new tariffs. The Fed knows it has to cut again in September.
At 12:30 GMT, traders will get the chance to respond to U.S. labor reports. Non-Farm Employment Change is expected to show the economy added 164K jobs in July. Average Hourly Earnings are expected to have risen by 0.2% and the Unemployment Rate is expected to have dipped to 3.6%.
The U.S. Trade Balance is expected to come in at -54.2 billion, better than the previously reported 55.5 billion.
At 14:00 GMT, Revised University of Michigan Consumer Sentiment is expected to rise slightly to 98.5 and Factory Orders are expected to come in at 0.6%
Once again, all these reports represent the past, the new tariffs have just changed the playing field so what difference does it make. Traders were going to use the jobs data to determine whether the Fed should cut rates in September, but the financial markets and Trump have already determined they will in my opinion.