The AUD/NZD currency pair has experienced a significant rebound after reaching a weekly low earlier this week. This upturn follows the Reserve Bank of New Zealand’s (RBNZ) announcement of a 50 basis point cut in interest rates, which has adversely affected the New Zealand Dollar (NZD) and provided support for the AUD/NZD exchange rate. In recent trading, the pair has approached the 1.1050 level, inching closer to the highest levels seen since mid-August.
In its October policy meeting, the RBNZ made the decision to lower the Official Cash Rate (OCR) from 5.25% to 4.75%. The central bank cited a prevailing excess capacity in the economy as a factor contributing to subdued inflation expectations. Changes in wages and prices suggest a transition to a low-inflation environment, prompting speculation about further potential rate cuts in the coming months. This outlook heavily weighs on the NZD while providing a supportive backdrop for the AUD/NZD pair.
In contrast, the Australian Dollar (AUD) is currently facing challenges in gaining traction. It remains near a multi-month low against the US Dollar amid market disappointment regarding the recent stimulus measures from China. This hesitance could temper enthusiasm among traders looking to make aggressive purchases of the AUD/NZD, potentially capping any further upward movements in this cross. Nevertheless, should buying interest continue and prices surpass the 1.1060 level, it may initiate a fresh wave of buying activity that could support an ongoing uptrend seen over the last two weeks.
Overall, the landscape reflects a delicate balance of monetary policy actions from the RBNZ while external factors, particularly related to China’s economic situation, continue to influence the performance of the Australian Dollar.
