Analysis

AUD/NZD: Rate differentials open up [Video]

This week, the RBA surprised markets with another unexpected 25 bps hike. With headline inflation at 7% y/y and core inflation firm at 6.5% y/y, the RBA has acted to try and bring down inflation fast. Current market pricing sees the RBA reaching a terminal rate of 4.49% at the end of this year.

The monetary policy of Australia is in contrast to that of New Zealand. The RBNZ signaled that it thinks it has conducted its last interest rate hike by keeping its terminal projections in line with current levels.

So, with this interest rate path divergence opening up between the AUDNZD pair, watch for dip buyers in the AUDNZD pair over the next few days. A more aggressive RBA should lift the AUD against a “mission accomplished on rates” RBNZ.

Major Trade Risks: The biggest risk here is if interest rate expectations change between the RBA and the RBNZ. For example, if inflation in New Zealand rises, then the RBNZ may need to be more aggressive again. This would negate this outlook.


Learn more about HYCM

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.


RELATED CONTENT

Loading ...



Copyright © 2024 FOREXSTREET S.L., All rights reserved.