The Australian and New Zealand Dollars closed lower on Monday as investors continued to react to the divergence between the hawkish policy of the U.S. Federal Reserve and the dovish policies of the Reserve Bank of Australia and the Reserve Bank of New Zealand.
The AUD/USD settled at .7623, down 0.0033 or -0.43% and the NZD/USD closed at .6902, down 0.0024 or -0.35%.
It was another light news day in the U.S. on Monday. Late in the session, the federal government released a report that showed it began its new budget year with an October deficit of $63.2 billion, up sharply from a year ago. This was larger than the $58.2 billion forecast. The size of the deficit may have been a surprise, but the deficit wasn’t since the government has run deficits in October for each of the past 64 years.
The Treasury Department reported that the October deficit was 37.9 percent higher than the $45.8 billion deficit recorded in October 2016.
The report went on to say that both government receipts and spending were up for the month, with receipts climbing 14.3 percent to $235.3 billion, a record for the month of October. The larger spending figure was up a sizable 11.6 percent to $298.6 billion.
The Congressional Budget Office estimated in June that the deficit for the current budget year, which runs from October 1 to September 30, would fall to $563 billion. However, that estimate did not include money for a tax cut being pushed by the Trump Administration and GOP lawmakers.
The AUD/USD and NZD/USD are trading mixed early Tuesday. Both were driven lower by disappointing Chinese economic data. However, a surprisingly strong survey of domestic business activity helped boost the Australian Dollar.
The survey of businesses from NAB showed them enjoying the best conditions in two decades with sales and profits surging in October. The NAB Business Confidence report came in at 8 and the previous report was revised up to 8.
This news supports the RBA’s assessment of the economy. Last week, it reaffirmed is outlook for an acceleration in economic growth even as it trimmed forecasts for inflation.
In China, a survey of Chinese retail sales and industrial production missed market forecasts, suggesting the economy may be losing some steam as Beijing cracks down on debt risks and pollution.
Chinese Industrial Production rose 6.2%, lower than the 6.3% forecast. Fixed Asset Investment matched the 7.3% forecast. Retail sales grew 10.0% versus a 10.9% estimate. Foreign Direct Investment was 1.9%.
This news isn’t good for Australia because China is the country’s single biggest export customer. New Zealand’s commodity-linked currency is also sensitive to signals on Chinese demand and slipped in the wake of the data.
This article was originally posted on FX Empire
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