AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Down on GDP Plunge; Kiwi Supported by RBNZ Comments

The Australian and New Zealand Dollars are trading mixed on Wednesday with the Aussie under pressure because of worse-than-expected quarterly GDP data and the Kiwi supported by positive comments from the highest ranking official at the Reserve Bank of New Zealand. A stronger U.S. Dollar is also weighing on the Aussie, while helping to cap the Kiwi’s gains.

At 09:42 GMT, the AUD/USD is trading .7344, down 0.0031 or -0.41% and the NZD/USD is at .6760, up 0.0001 or +0.01%.

Australia Records Worst Economic Slump as Pandemic Ends Golden Run

Australia fell into its deepest economic slump on record last quarter as coronavirus curbs paralyzed business activity, while fresh outbreaks threaten to upend any immediate recovery, piling pressure on the government to keep fiscal taps available.

Data from the Australian Bureau of Statistics on Wednesday showed the country’s A$2 trillion ($1.47 trillion) economy shrank 7% in the three months to end-June from a 0.3% decline in the March quarter.

The country joins the United States, Japan, UK and Germany in technical recession, defined as two straight quarters of decline, in Australia’s first such downturn since 1991.

“This crisis is like no other,” Treasurer Josh Frydenberg told reporters in Canberra.

“Today’s national accounts confirm the devastating impact on the Australian economy from COVID-19. Our record run of 28 consecutive years of economic growth has now officially come to an end.”

RBNZ Actions Have Been Effective in Lowering Rates, Governor Orr Says

The Reserve Bank of New Zealand’s (RBNZ) actions have been effective in broadly lowering interest rates, governor Adrian Orr said on Wednesday, adding that policymakers are also preparing extra tools to use if needed.

“We have been effective in lowering interest rates across the board, and ensuring there is plentiful liquidity in the financial system,” Orr said in a speech delivered to the Victoria University School of Government and Policy Studies.

Orr also reiterated that the RBNZ was actively preparing additional monetary policy tools to use if needed, which included negative wholesale interest rates, further quantitative easing, direct lending to banks and ongoing forward guidance.

Short-Term Outlook

The RBNZ comments are a little more upbeat than the news coming out of Australia, which could even worsen enough to fuel another round of fiscal stimulus from the government.

In a clear signal that the fiscal stimulus will keep flowing Frydenberg added, “Our commitment to the Australian people is that we have your back. We will be with you through this crisis and…all the way out of this crisis.

Economists are now saying that the recovery in Australia will be protracted and that it may take until early 2022 for activity to return to pre-pandemic levels. Also expected to continue to weigh on the economy is the lockdown in Victoria, other ongoing restrictions and lower income.