The Australian Dollar New Zealand Dollar exchange rate fluctuated in a relatively tight range around 1.05 when markets opened this week. The pair’s volatility has worsened as investors sell off the risky currencies in favour of ‘safe haven’ currencies after Donald Trump’s first weekend as US President.
Australian Dollar (AUD) Weakens on ‘Safe Haven’ Demand
The Australian Dollar’s sturdiness in recent weeks had faded by Monday’s Asian session, as the antipodean currency became jittery following the first weekend of the US Trump Presidency.
As Trump’s inauguration speech put a focus on protectionism, markets became concerned about what could become of US trade with Asian-Pacific nations such as Australia.
As a result, risky currencies were sold off when the new week began in favour of ‘safe haven’ currencies like the Japanese Yen (JPY).
The Australian Dollar was also unable to stay afloat on the back of iron ore market performance. Due to lower activity and sentiment in China amid Chinese New Year celebrations, demand for Australia’s primary commodity plunged.
New Zealand Dollar (NZD) Also Weakened by Fears of Trump Protectionism
The New Zealand Dollar’s own movement during Monday’s Asian session was similar to AUD’s. The risky antipodean currency weakened due to fears of protectionism from the US Trump administration.
However, due to last weeks’ decent dairy commodity news, as well as the higher yields of the ‘Kiwi’, NZD has performed slightly better than the ‘Aussie’ thus far this week.
Friday saw the publication of surprisingly strong Chinese growth data and the New Zealand Dollar appeared to benefit from this news more than the ‘Aussie’.
Australian Dollar New Zealand Dollar Forecast: All Eyes on Trump Administration
Volatility in the Australian Dollar New Zealand Dollar exchange rate is likely to continue to worsen unless the US Trump administration edges away from its protectionist stance.
This week’s domestic data is most likely to influence direction in AUD/NZD in the short term however.
Tuesday’s Asian session will see the publication of New Zealand’s services index figures from December.
Wednesday’s Asian session will be highly important for the Australian Dollar in particular, as Australia’s Q4 Consumer Price Index (CPI) results will be published.
Australian inflation is expected to come in at 0.7% again quarter-on-quarter, with yearly inflation predicted to improve from 1.3% to 1.6%. If this beats expectations, AUD NZD is likely to advance this week.
AUD NZD Interbank Rate
At the time of writing, the Australian Dollar New Zealand Dollar exchange rate trended in the region of 1.05, while the New Zealand Dollar Australian Dollar exchange rate trended at around 0.95.