Australian Dollar to New Zealand Dollar Exchange Rate Advances on US Bond Yields
Amid a lack of supportive news in either Australia or New Zealand, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate only saw modest movement last week.
Instead, global factors affecting risk-sentiment drove AUD/NZD, helping it to climb by half a cent from the week’s opening level of 1.0640 to 1.0706. This week so far, AUD/NZD trends slightly below the week’s opening levels.
Last week, both the Australian Dollar (AUD) and New Zealand Dollar (NZD) were under pressure, as global risk-sentiment remained low.
However, despite some underwhelming Australian ecostats, AUD was able to gain on NZD.
The New Zealand Dollar saw a bigger downside impact from news that US 10-year Treasury bond yields were strengthening and had touched above 3% for the first time in over four years.
Rising bond yields indicated investors expect US interest rates will see strong rises in the short to mid-term future.
As the Reserve Bank of New Zealand (RBNZ) looks set to leave monetary policy frozen for a long time to come, NZD has become less appealing with investors anticipate it will lose its comparatively high yield compared to USD.
Australian Dollar (AUD) Exchange Rates Ahead of Reserve Bank of Australia (RBA)
The Australian Dollar was able to climb against a weak New Zealand Dollar last week, but this was despite a lack of any market bullishness in the ‘Aussie’ itself.
Australian Dollar trade was weaker following last Tuesday’s underwhelming Australian inflation results. Australian inflation came in at just 0.4% in Q1, rather than the forecast 0.5%, while the yearly rate remained at 1.9% rather than climbing to 2% as predicted.
The lower inflation results dampened market hopes for the Reserve Bank of Australia (RBA) to take a more hawkish tone in Australian monetary policy any time soon.
As a result, AUD investors are now highly anticipating the RBA’s May policy decision – which will take place on Tuesday.
On top of inflation and RBA concerns, the Australian Dollar has been unappealing on commodity news. Prices of iron ore, Australia’s most lucrative commodity, have been falling over the last week.
Australia’s Monday data was mixed, with private sector credit beating expectations but HIA’s new home sales figure contracting.
New Zealand Dollar (NZD) Exchange Rate Strength Limited
The New Zealand Dollar was unable to sustain any notable gains versus the Australian Dollar on Monday, as investors lack a reason to buy the currency.
Last week’s New Zealand data was underwhelming too, with Thursday’s trade balance results coming in with an unexpected contraction.
Monday’s NZ data continued this disappointing data trend, with ANZ’s April business confidence results worsening from -20 to -23.4.
Australian Dollar to New Zealand Dollar (AUD/NZD) Forecast: RBA Meeting in Focus
The Reserve Bank of Australia (RBA) is not expected to make any changes to monetary policy during Tuesday’s upcoming policy decision, but the tone the bank takes could still be pivotal for AUD/NZD.
For example, if the RBA takes a more hawkish than expected tone on monetary policy despite recent underwhelming data, the Australian Dollar will see a surge in demand and climb against the New Zealand Dollar.
This may be unlikely however. In fact, if the RBA is even more cautious than investors expect AUD/NZD could instead shed some of its recent gains.
An unsurprising tone from the bank is unlikely to have much impact on AUD/NZD movement, and will leave investors focused on data due in the rest of the week.
Australian manufacturing PMI data will be published on Tuesday, followed by the services PMI and trade balance results on Thursday.
It will be a big week for New Zealand data too, with the nation’s Q1 job market results due for publication on Wednesday.
Commodity news could inspire some Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate trade too. Prices of New Zealand’s most lucrative commodity, dairy, will be updated in Tuesday’s Global Dairy Trade (GDT) auction.