The Reserve Bank of New Zealand left the official cash rate at 0.25%, as widely expected, but indicated they are prepared to take further action and remained concerned over the challenges facing the economy. Their relatively gloomier outlook than the Reserve Bank of Australia should support AUD/NZD over the short to medium term.
The RBNZ acknowledged the positive developments in containing the virus to the point of opening the economy sooner than expected and the government's larger-than-expected fiscal stimulus nL4N2E10N6. But they noted the positive impact of these developments "could be short-lived given the fragile nature of the global pandemic containment".
The emphasis in Click here was on ongoing downside risks to the economy and the likely need for the RBNZ to expand their quantitative easing efforts and prepare for negative rates.
The RBNZ also sounded a bit more worried about the rising NZD than their Australian counterparts are about the rising AUD nL4N2DZ062.
Members noted the NZD has appreciated since the May meeting and was "dampening the outlook for inflation and reducing returns for New Zealand exports".
The RBNZ is less upbeat than the RBA, which should support the AUD/NZD.
The cross is currently trading around 1.0715 and a daily close above the 21-day moving average at 1.0703 would be bullish.
The initial target for a move higher is the June 2 trend high at 1.0880.
aud/nzd Click here