Australia Markets closed

AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Appear to Be Betting on Soft CPI Data

James Hyerczyk

The Australian and New Zealand Dollars rose on Monday on concerns over struggling U.S. inflation and increased demand for higher risk assets. Position-squaring ahead of Tuesday’s consumer inflation report may have also helped boost prices.

The AUD/USD and NZD/USD settled at .7871, up 0.0026 or +0.33% and .7293, up 0.0014 or +0.20%, respectively.

Daily AUD/USD

Investors also reacted to a drop in U.S. Treasury yields after a tepid auction.

U.S. government debt yields slipped on Monday following a set of weak Treasury Department auctions. The Treasury Department auctioned $21 billion in 10-year notes at a high yield of 2.889 percent. The bid-to-cover ratio, an indicator of demand, was 2.5.

According to Peter Boockvar of Bleakly Advisory Group, “Supply is certainly ramping up. Inflation expectations are near the highest level in 5 years and the Fed of course is letting their Treasury stash run off.”

Daily NZD/USD

Forecast

The Aussie and Kiwi are trading higher early Tuesday as investors prepare for today’s U.S. consumer inflation report. The Australian Dollar continues to receive support in reaction to President Trump’s granting of an exemption to Australia from his new tariffs on steel and aluminum.

At 0725 GMT, the AUD/USD is trading .7875, up 0.0004 or +0.05% and the NZD/USD is at .7322, up 0.0029 or +0.40%.

Early Tuesday, Reserve Bank of New Zealand acting governor Grant Spencer said the government should consider a permanent structure for macro-prudential tools, which he attributes as helping the regulator meet its policy objectives.

The Aussie continued its rally against the greenback early Tuesday as weaker commodity prices were offset by lower U.S. bond yields.

On Tuesday, investors will get the opportunity to react to the latest U.S. data on consumer inflation. It is expected to come in at 0.2%, down from the previously reported 0.5%. Core CPI is also expected to rise by 0.2%, down from the previously reported 0.3%.

This week’s U.S. inflation data could generate more uncertainty for investors. Weaker-than-expected consumer inflation data on Tuesday and producer inflation data on Wednesday could give stocks a boost while putting further pressure on the struggling U.S. Dollar. Both of these events would be bullish news for the Aussie and Kiwi.

This article was originally posted on FX Empire

More From FXEMPIRE: