The Australian and New Zealand Dollars are drifting sideways to lower for a fourth straight session on Tuesday, suggesting investors are busy squaring up end-of-the-quarter positions and sitting on the sidelines ahead of Thursday’s U.S. Non-Farm Payrolls report and Friday’s U.S. bank holiday. Volume is well below average and the price action seems to be indicating that the currencies are getting ready to roll over to the downside.
Worries that the surge in coronavirus cases could curtail the global economic recovery are weighing heavily on the commodity-linked Aussie and Kiwi. Stronger-than-expected U.S. economic data also pressured the currencies.
A report from the U.S. on Monday showed Pending Home Sales rebounded by the most on record in May, suggesting the housing market was starting to turn around. Pending Home Sales rose 44.3%, up from the previously reported -21.8%. Economists were looking for a reading of 18.9%. This news helped underpin the U.S. Dollar.
Pacific Rim Economic News
Early Tuesday, Australia reported that Private Sector Credit fell 0.1%. This was below the 0.1% forecast and 0.0% previous reading. In New Zealand, the ANZ Business Confidence report came in at -34.4, slightly worse than the previously reported -33.0.
In New Zealand, business confidence continues to improve as the economy returns to normal but still points to a recession, the latest ANZ business confidence survey showed.
“A vigorous bounce out of lockdown is evident in the numbers, but the levels are consistent with our view that the recession is just starting,” said ANZ chief economist Sharon Zollner.
Aussie, Kiwi Show Little Reaction to China Economic Data
China’s factory activity expanded at a stronger pace in June after the government lifted lockdowns and stepped up investment, but persistent weakness in export orders suggests the coronavirus crisis will remain a drag on the economy for some time.
The official manufacturing Purchasing Managers’ Index (PMI) came in at 50.9 in June, compared with May’s 50.6, National Bureau of Statistics (NBS) data showed on Tuesday, and was above the 50.4 forecast in a Reuters poll of analysts.
The price action indicates investors are torn between optimism over a swift recovery in global economic growth and fears a surge in new coronavirus cases could derail a swift V-shaped recovery.
Furthermore, last week’s comment from Reserve Bank of Australia (RBA) Governor Philip Lowe that the Australian Dollar is overpriced, continues to weigh on sentiment. Additionally, the dovish tone in last week’s Reserve Bank of New Zealand (RBNZ) monetary policy statement is going to make it difficult to mount a rally over the near-term.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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