AUD/USD and NZD/USD Fundamental Daily Forecast – Tentative Trade Ahead of Aussie CPI, GDP Reports

The Australian and New Zealand Dollars are inching lower in a lackluster trade after giving up earlier gains. The early price action reflects uncertainty over domestic central bank policy and tentativeness on the part of buyers to play the long side given the rising expectations of a more aggressive Federal Reserve.

At 04:45 GMT, the AUD/USD is trading .6726, down 0.0012 or -0.18% and the NZD/USD is at .6155, down 0.0011 or -0.18%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $66.62, up $0.06 or -0.09%.

Hovering Above Multi-Month Lows

The Aussie and Kiwi are hovering just above multi-month lows on Tuesday after posting a technical bounce the previous session. Traders are showing little reaction to local data that showed the pulse of Australian consumers slowing in the face of accelerating inflation and rising interest rates.

The Australian Dollar tested its lowest level since January 4 on Monday before bouncing back 0.2%. The New Zealand Dollar finished flat after testing its lowest level since late November.

Australia’s Current Account Surplus Widens in Q4

Australia’s current account surplus rose sharply in the December quarter as resource exports boomed and imports eased, providing a sizable fillip to economic growth, Reuters reported.

Data from the Australian Bureau of Statistics on Tuesday showed the current account surplus widened to A$14.1 billion in the fourth quarter. That was compared to a revised surplus of A$0.8 billion in the third quarter and handily beat forecasts of a A$6.5 billion surplus.

The ABS said net exports would add 1.1 percentage points to gross domestic product (GDP) in the fourth quarter, when analysts had looked for a contribution of 1.3 percentage points.

Australia Retail Sales Rebound in Jan, but Pulse Shows

Australian retail sales rebounded in January after a surprise plunge in December that owed much to changing spending habits, though the underlining pulse was facing headwinds from high inflation and rising interest rates, Reuters reported.

Data from the Australian Bureau of Statistics (ABS) on Tuesday showed retail sales rose 1.9% in January from December, when they dived 4.0%. Sales of A$35.1 billion ($23.67 billion) were 7.5% higher than a year earlier.

New Zealand Businesses Less Pessimistic in February – ANZ Survey

New Zealand’s business confidence improved in February as all activity indicators saw a lift, although many remain at very subdued levels compared to historical averages amid intense inflationary pressures, an ANZ Bank survey showed on Tuesday, Reuters reported.

The survey’s headline measure showed a net 43.3% of respondents expected the economy to deteriorate over the year ahead versus a 52% pessimism level in the previous poll in January.

Short-Term Outlook

Australian Dollar traders are now shifting attention to monthly consumer price index (CPI) data on Wednesday, which is widely expected to show consumer inflation eased slightly to 7.9% in January, from 8.4% the previous month.

Figures for gross domestic product (GDP) are also due on Wednesday and should show the economy grew by a solid 0.7% in the December quarter, and 2.7% for the year, driven by a sizeable contribution from international trade as resource exports boomed.

Trader should risk for surprises in either direction from the CPI report, but should global risk sentiment sour then look for a new low for the year.

The Reserve Bank of Australia (RBA) has already lifted rates by 325 basis point to a decade-peak of 3.35%. Ahead of the reports, the markets are wagering on further hikes toward 4.35%.