AUD/USD and NZD/USD Fundamental Daily Forecast – Friday’s Reversal Fueled by Weak US Consumer Sentiment

The Australian and New Zealand Dollars eased higher from multi-month weakness last week to post a gain on Friday.

Early in the session the Aussie and the Kiwi were pressured as traders awaited fresh clues on the U.S. economy after bringing forward bets last week for a Federal Reserve interest rate hike on the back of red-hot inflation. Helping to turn the market around, however, was a survey from the University of Michigan that indicated high inflation was eroding consumer confidence.

On Friday, the AUD/USD settled at .7330, up 0.0040 or +0.55% and the NZD/USD finished at .7041, up 0.0020 or +0.28%.

Strong Greenback Weighs on Aussie, Kiwi

The AUD/USD and NZD/USD have been under tremendous selling pressure since Wednesday, when data showed a broad-based rise in U.S. consumer prices last month at the fastest annual pace since 1990, casting doubts on the Fed’s stance that price pressure will be transitory.

Meanwhile, U.S. money markets are already pricing in the first Fed post-pandemic rate hike by July 2022 and a high likelihood of another by November next year as of the end of Friday’s close.

Aussie, Kiwi Rebound on US Consumer Sentiment Plunge

The Australian and New Zealand Dollars turned higher on Friday after an early break as U.S. consumer sentiment plunged in early November to the lowest level in a decade as surging inflation cut into households’ living standards, with few believing policymakers are taking sufficient steps to mitigate the issue, a widely followed survey published on Friday showed.

The University of Michigan’s Consumer Sentiment Index plunged to 66.8 in its preliminary November reading from October’s final reading of 71.7. That was the lowest level since November 2011 and was far short of the median estimate among economists of 72.4 in a Reuters poll.

Short-Term Outlook

The next short-term move in the AUD/USD and the NZD/USD will depend upon economic data from China and the United States and what Federal Reserve speakers will have to say about the timing of the first rate hike and others.

Reports showing a slowdown in China’s economy could weigh on both currencies on Monday.