You are currently viewing AUD/USD and NZD/USD Fundamental Daily Forecast – Tight Aussie Labor Market Supports Rate Hike Expectations

AUD/USD and NZD/USD Fundamental Daily Forecast – Tight Aussie Labor Market Supports Rate Hike Expectations

The Australian and New Zealand dollars edged higher on Thursday on improving risk sentiment amid signs of easing of the COVID lockdown in Shanghai, although investors remained nervous about the state of the Mondial economy.

The Aussie is getting further support from a drop in Australian unemployment to its lowest level in nearly 50 years. The Kiwi mainly reacts to the slight change in sentiment.

At 06:45 GMT, AUD/USD is trading at 0.6976, up 0.0025 or +0.36%. NZD/USD is at 0.6321, up 0.0026 or +0.42%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust (FXA) ETF settled at $68.97, down $0.52 or -0.74%.

Shanghai eases COVID restrictions in some regions

Shanghai’s financial hub, hit by COVID-19, will start allowing more businesses in zero-COVID zones to resume normal operations from early June, a deputy mayor said Thursday as the city waits with looking forward to the end of the lockdown.

Shanghai, which is battling China’s biggest-ever coronavirus outbreak, is steadily allowing more businesses to reopen and letting more residents leave their homes for the first time in nearly seven weeks.

The city was “striving to achieve a full resumption of work and production as soon as possible,” Deputy Mayor Zhang Wei said at a press briefing.

Falling Australian unemployment rate supports rate hikes

Figures from the Australian Bureau of Statistics (ABS) showed on Thursday that Australia’s unemployment rate was at its lowest level in nearly 50 years in April as businesses took on more full-time workers. This tight labor market will increase pressure on the Reserve Bank of Australia (RBA) to raise interest rates.

According to the ABS, Australia’s unemployment rate held steady at 3.9% in April, down from a downwardly revised 3.9% in March, in line with market forecasts.

Employment missed forecasts with a rise of just 4,000, although this reflected a strong gain of 92,400 full-time jobs offset by a decline of 88,400 part-time jobs.

New Zealand’s producer price index rises in the first quarter

New Zealand producer prices rose in the first quarter. Data from Statistics New Zealand showed on Thursday that input prices rose 3.6% and product prices rose 2.6%.

Last week, the Reserve Bank of New Zealand (RBNZ) Quarterly Expectations Survey showed that business leaders expected annual inflation to be 4.88% in the coming year, compared to 4.4% in the previous survey.

Daily forecast

The tightening Australian labor market strongly suggests that the RBA will raise interest rates again in June as it struggles to contain a spike in inflation to a 20-year high. Traders’ odds point to a move to 0.60% at the June policy meeting.

Meanwhile, the RBNZ is expected to raise interest rates by half a percentage point at each of its next three policy meetings to rein in soaring inflation, according to Westpac Banking Corp.

Rate hikes combined with Shanghai easing COVID restrictions appear to be enough to support AUD/USD and NZD/USD on Thursday. However, gains should be capped in the near term as the Federal Reserve is expected to raise rates at a more aggressive pace.

Leave a Reply