On Tuesday (April 23), during Asian trading, the Australian dollar and New Zealand dollar continued their strong performance, both breaking multi month highs. The global asset reshuffle triggered by Trump's "bombardment of the Federal Reserve" is accelerating the outflow of funds from US dollar assets, with the Australian and New Zealand currencies being one of the biggest beneficiaries.

Strong exchange rate breaks through key levels

The Australian dollar hit a intraday high of 0.6438 against the US dollar, setting a new high since December 9th last year, successfully breaking through the key resistance level of 0.6409 and transforming into support. The New Zealand dollar rose synchronously to 0.6028 against the US dollar, breaking the high since November 7th last year, and is currently testing the resistance level of 0.6037.

IG analyst Tony Sycamore pointed out, "If the Australian dollar can stand above the 200 day moving average of 0.6474, it will confirm a V-shaped reversal pattern, and the next target is looking towards the 0.68-0.69 range

Trump's remarks have dealt a heavy blow to the US dollar

Behind the strengthening of the exchange rate is Trump's fierce criticism of Federal Reserve Chairman Powell on social media on Monday. He referred to Powell as the 'big loser' and threatened to demand an immediate interest rate cut. This statement led to the US dollar index falling to a three-year low and the US stock market closing sharply lower.

Richard Yetsenga, Chief Economist of ANZ Bank, warned that "the way the US government handles problems is triggering a triple crisis of US assets - the stock market, bond market, and US dollar falling simultaneously, and this situation is likely to continue in the short term

Monetary policy expectations

Reserve Bank of Australia: The market expects a 100% probability of a 25 basis point rate cut in May, a 20% probability of a 50 basis point rate cut, and an expected 125 basis point rate cut for the entire year; The Reserve Bank of Australia has only cut interest rates by 25 basis points so far this year, currently at 4.1%.

Reserve Bank of New Zealand: There is a 100% probability that the market expects a 25 basis point interest rate cut to 3.25% in May, and it is expected that the interest rate will drop to 2.75% by the end of the year; The Reserve Bank of New Zealand has taken a cooling off twice this year, at 50 basis points and 25 basis points respectively.

The Australian dollar hit a new low of 1.0672 against the New Zealand dollar since March 6, 2024, and is currently trading around 1.0677, reflecting a more pessimistic market outlook for the Australian economy.

prospect

This week, due to the shortened holiday and lack of important data guidance, the exchange rate trend in the Australia New Zealand market will continue to be dominated by fluctuations in the US dollar. As the conflict between the Trump administration and the Federal Reserve becomes public, global funds are being reconfigured, and the Australian and New Zealand currencies may continue to benefit from this round of dollar trust crisis. However, if the US tariff policy triggers further deterioration of the global economy, the rebound space of the Australian and New Zealand currencies may be limited.