Australia, New Zealand Dollars Shaken by US Economy Dynamics

The Australian and New Zealand dollars have exhibited signs that they are largely impacted by the latest developments in the US economy. Last week, the official currencies of the two large nations in Oceania finished sharply lower against the US dollar.

We find this news highly important, especially for our forex traders and readers from New Zealand and Australia. We believe that they should learn about these happenings as they could get affected significantly in their trading activities this week.

According to the report posted online by FX Empire, a website delivering financial news, predictions, securities reports, detailed broker reviews, and the latest developments in the major markets, the Australian dollar or AUD/USD settled at US$0.7703 last week. This figure is a manifestation that the currency is down -0.53 percent or US$0.0041.

Furthermore, the New Zealand dollar or NZD/USD closed at US$0.7128, down -1.16 percent or US$0.0084. Economic analysts reckon two events in the United States are greatly affecting the Aussie and the Kiwi lately. One of them is the US labor market recovery garnering traction.

Last Thursday, June 10, the United States Department of Labor relayed that initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 376,000 for the week ending Saturday, June 5.

This figure is reportedly the lowest number since mid-March 2020, the time when the first wave of coronavirus or COVID-19 infections barreled through America and resulted in non-essential enterprises’ closures.

The US consumer inflation heating up as the US economy reopens is another factor seen to affect the Australian and New Zealand dollars. Last month, consumer prices in the United States surged solidly.

This event led to the largest yearly increase in almost 13 years. Reopening the US economy involved a stronger demand for travel-related services.

Additionally, an international semiconductor shortage resulted in used motor vehicles’ prices increasing. The US consumer price index (CPI) surged 0.6 percent in May, following its rise of 0.8 percent in April, which was the biggest gain since June 2009.

Furthermore, in the 12 months through May, the CPI accelerated 5 percent, which indicated the largest year-on-year increase since August 2008 and followed a 4.2 percent rise in April. Economists that Reuters surveyed had predicted the CPI rising 0.4 percent last month and vaulting 4.7 percent year-on-year.

Core inflation climbed 0.7 percent after soaring 0.9 percent in April. We suggest our readers, especially those from New Zealand and Australia, be in a wait-and-see position at the moment.

We understand that the risky New Zealand and Australian dollars are heavily affected by the COVID-19 pandemic’s easing grip on the US economy. This development may bring repercussions.

However, we believe that the surge in the US consumer inflation and the diminishing unemployment rates in America would not do prolonged harm to the Kiwi and the Aussie. Fed Chairman Jerome Powell is scheduled to speak to the press following the US central bank’s issuance of its official statement this coming Wednesday, June 16.

He is anticipated to affirm the Fed’s commitment to ease monetary policy. With this forthcoming announcement of the Fed’s chairman, we understand that his and his office’s predictions for the US economy, interest rates, and inflation could move the US dollar and consequently impact the Australian and New Zealand dollars considerably.

Nevertheless, we want our readers to stay tuned and monitor the subsequent developments. We believe that all of these events, especially those that traders think are detrimental to them, are all temporary.

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