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Oct 04 - 11:55 PM

AUD/NZD - COMMENT-Hawkish RBNZ Likely To Tip AUD/NZD Lower

By John Noonan  —  Oct 04 - 10:40 PM

The contrast between the more hawkish-than-expected Reserve Bank of New Zealand and the Reserve Bank of Australia's surprisingly dovish rate decision is likely to send the AUD/NZD cross lower in the week ahead.

The RBA scaled back their tightening efforts with a 25 basis-point hike on Tuesday, when there was a clear consensus they would hike 50 bps for the fifth straight meeting.

The RBNZ followed on Wednesday by delivering the forecast 50 bps increase, but revealed they debated a 75 bps hike.

The RBNZ statement and minutes were unambiguously hawkish, focussing on inflation pressures arising from a tight labour market - without highlighting downside risks to the economy, as some commentators had expected.

The Click here the risks of a weaker NZD, stating: "a lower New Zealand dollar, if sustained, poses further upside risk to inflation over the forecast horizon."

The RBA didn't mention the exchange rate in Wednesday's statement, which suggests to the market the central bank is not as concerned as its counterpart across the Tasman.

AUD/NZD trended higher through much of September, as the five, 10 and 21-day moving averages stayed in a bullish alignment and were tilting higher.
The trend stalled last week and ended Wednesday when the cross dived below the 21-DMA at 1.1304.

It is now testing the 50% retracement of the 1.0991-1.1496 move at 1.1244 and a break targets the 61.8 Fibonacci retracement at 1.1184. A test of the key 100-DMA support at 1.1120 is the objective of the current drop.

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Source:
Refinitiv IFR Research/Market Commentary

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