Last week, the Australian Dollar saw a surge in value as trade tensions between the United States and China eased. However, the cancellation of a meeting between the two countries by China late Friday raised concerns that the currencies could see a decline early this week.
The Australian Dollar, often seen as a proxy for China-related trades and risk sentiment, reached a three-week high and experienced its biggest weekly gain in 14 months. S&P Global Ratings also upgraded Australia’s outlook to stable from negative, further boosting the Aussie.
The AUD/USD closed at .7288, up 1.86%. The Reserve Bank of Australia (RBA) expressed concerns about risks from U.S.-China trade tensions and weak wages in its monetary policy minutes. Despite reaffirming a potential interest rate hike, the RBA emphasized that there was no strong case for a near-term adjustment to monetary policy.
In New Zealand, the New Zealand Dollar also benefitted from the easing of trade tensions and positive economic data. The country’s GDP rose by 1% in the second quarter, surpassing expectations.
The NZD/USD closed at .6680, up 2.05%. Looking ahead, renewed trade concerns could impact the Aussie and Kiwi currencies. Investors will also be closely watching the Federal Open Market Committee meeting for insights into future interest rate hikes by the Federal Reserve.
Any indication of a more dovish stance from the Fed could support the AUD/USD and NZD/USD. In New Zealand, focus will be on business confidence and the Reserve Bank of New Zealand’s interest rate decision, which is expected to remain at 1.75%.
Overall, the outlook for the Australian and New Zealand Dollars will be influenced by ongoing trade tensions, central bank decisions, and key economic data releases in the coming week.