Bullish domestic news and a “soft” Fed monetary policy statement helped drive the Australian and New Zealand Dollars higher against the U.S. Dollar last week. Oversold technical conditions may have contributed to the rallies which are not likely to change the trend to up on the weekly chart, but could result in a meaningful correction.
For the week, the AUD/USD settled at .7639, up 0.0131 or +1.75% and the NZD/USD closed at .6981, up 0.0145 or +2.12%.
Australian Dollar
Early in the week, Reserve Bank of Australia Governor Philip Lowe said he thinks bitcoin is mostly attractive to criminals and speculators but has acknowledged there could one day be an electronic Aussie Dollar based on similar technology.
“It is possible that the RBA might, in time, issue a new form of digital money – a variation on exchange settlement accounts – perhaps using distributed ledger technology,” Dr. Lowe said in a speech to the Australian Payment Summit in Sydney.
“The case for doing this has not yet been established but we are open to the idea.”
In other news, Westpac Consumer Sentiment rose 3.6% to 103.3 in December, up from the previous 99.7 in November.
The Australian Dollar was also supported by strong Australian job figures. The ABS’s latest job numbers blew away the estimates. The data showed that 62,000 new jobs were created in November when only 18,000 were expected. The Australian Unemployment Rate stayed at 5.4%.
New Zealand Dollar
There were no major reports from New Zealand last week, but the Kiwi received support from the appointment of Adriann Orr as the new governor of the Reserve Bank. This news lifted some of the uncertainty over the direction of central bank monetary policy. Traders are reacted to the first budget from Prime Minister Jacinda Adern.
U.S. Dollar
The U.S. Dollar retreated after the Fed’s monetary policy announcements as the U.S. central bank kept its interest rate projections steady rather than revising them higher.
The Fed raised its benchmark rate by a quarter point to a range of 1.25-1.50 percent on Wednesday. The central bank projected three more rate hikes in both 2018 and 2019, unchanged from its September forecasts.
The central bank also hiked its GDP estimate from 2.1 percent in September to 2.5 percent. The Federal Open Market Committee also adjusted its inflation forecast for 2018 to 1.7 percent from 1.6 percent.
In other news, U.S. producer price data showed an increase in wholesale inflation, increasing hopes that price pressures may be rising from sluggish levels. According to the Labor Department, the producer price index for final demand increased 0.4 percent last month. The number met economist expectations.