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Australian Dollar New Zealand Dollar Exchange Rate Deterioration Forecast as Global Trade War Fears Heat Up

New Zealand Dollar Exchange Rates

Australian Dollar New Zealand Dollar Exchange Rate Slides as Major US Tariffs Provoke Trade War Fears

Markets were severely unsettled by the Trump administration’s announced tariffs on steel and aluminium imports, leaving the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate on a bearish trend.

The threat of a fresh trade war with China, and other metal exporters, weighed heavily on investor risk appetite, prompting global commodity prices to slump sharply throughout Friday.

As the move could have serious repercussions for the Australian mining sector this naturally saw support for the Australian Dollar (AUD) diminish sharply.

If the US does provoke a trade war with these new tariffs the global economy is likely to suffer, with growth expected to slow in an atmosphere of increased protectionism.

Worries over the implications for the Australian economic outlook, given the economy’s heavy reliance on the mining sector, are forecast to keep AUD exchange rates under pressure over the coming days.

Improved NZ Consumer Confidence Benefits New Zealand Dollar Exchange Rates

Even as investors piled back into safe-haven assets the downside potential of the New Zealand Dollar (NZD) was limited by a modest rebound in domestic building permits, putting further pressure on the AUD/NZD exchange rate.

Although building permits only saw growth of 0.2% on the month in January this was enough to encourage some measure of confidence in the outlook of the New Zealand housing market.

As the ANZ consumer confidence index also continued to push higher on the month the New Zealand Dollar was able to hold onto a stronger footing against its antipodean cousin.

While investors maintain some reservations over the underlying health of the New Zealand economy this positive data was still enough to support NZD exchange rates in the short term.

Australian Dollar Exchange Rate Forecast: RBA Meeting and Gross Domestic Product Data in Focus

The AUD/NZD exchange rate may struggle to find any particular support ahead of next week’s Reserve Bank of Australia (RBA) policy meeting.

While no change in interest rates is forecast at this juncture the nature of the meeting could still provoke some volatility for the Australian Dollar.

Any signs of greater confidence amongst policymakers could help to limit the vulnerability of AUD exchange rates, even if the prospect of higher interest rates remains a distant one.

Even so, as Sean Callow, research analyst at Westpac, noted:

‘The RBA made very clear last month that the cash rate was very unlikely to be moved for some time. That limits the impact of the data and RBA commentary.

‘However, AUD could be jittery around the GDP data, since it often surprises and is shaping up as a fairly soft 0.5% rise. Net exports look to be especially weak though 2018 looks more promising.’

Disappointing gross domestic product data could see the AUD/NZD exchange rate come under fresh pressure, though, especially if concerns over the global economic outlook persist.