The Australian and New Zealand Dollars are trading higher on Tuesday. The Aussie is reacting to better-than-expected domestic data and a change in the language in the latest Reserve Bank of Australia (RBA) rate statement. The Kiwi is being supported by comments from Reserve Bank of New Zealand (RBNZ) Governor Spencer. Both currencies are also being underpinned by technically oversold positions.
At 0644, the AUD/USD is trading .7643, up 0.0045 or +0.60% and the NZD/USD is at .6894, up 0.0037 or +0.54%.
Australian retail sales beat expectations with a read of +0.5% versus an estimate of +0.3%. The AIG Services Index was up slightly from the precious month at 51.7. The current account fell 9.1 billion. Traders were looking for a decline of 8.8 billion.
Retail sales grew at their fastest pace since May. The current account data showed that the country is a net borrower.
The RBA said Tuesday it is holding its benchmark cash rate unchanged at 1.5 percent. This news was widely expected. The central bank has kept rates at this level since August 2016.
Governor Philip Lowe said wages growth would remain weak for a while yet, though he noted reports of a skills shortage in the jobs market, which could put upward pressure on wages.
The RBA also said it was worried about Australians’ spending habits, as pay packets remain stubbornly stagnant and household debt is high.
The NZD/USD was supported by a hawkish comment from the head of the central bank about low inflation. Reserve Bank of New Zealand Governor Grant Spencer, speaking to business leaders in Auckland, commented: “To the extent that the leverage of monetary policy over domestic inflation may have reduced, this suggests a cautious approach when responding to inflation deviations from target and careful attention to our assessment of economic slack.
It may be appropriate for monetary policy to put relatively more weight on output, employment and financial stability relative to inflation.
However, this can only be sustained if monetary policy’s long term price stability credentials are maintained.
On Tuesday, investors will get the opportunity to react to U.S. Trade Balance and ISM Non-Manufacturing PMI.
In the AUD/USD, the main trend turned higher early Tuesday when buyers took out .7644. We could see an acceleration to the upside on a sustained move over .7654.
The NZD/USD it trying to regain a key retracement zone at .6880 to .6904. Look for a bullish tone on a sustained move over.6904 and a bearish tone on a sustained move under .6880.
This article was originally posted on FX Empire