AUD/NZD and the RBA and RBNZ divergence [Video]

Giles Coghlan LLB, Lth, MA Financial Source

Last week both the RBA and the RBNZ met, but their policy responses were quite different and a divergence has opened up between them. The RBA hiked by 25bps, but there had been a 50% chance that it would hike by 50bps according to short-term interest rate markets. The RBNZ, by contrast, hiked by 50bps and had mooted the idea of a larger 75bps rate hike.

The forward guidance was different too. The RBA has taken a more cautious note recently on further rate hikes and expressed some concerns about its domestic economy and the slowing global economy. Short Term Interest Rates are priced in a lower terminal rate after the last meeting.

The RBNZ, by contrast, had a far more hawkish perspective and Governor Orr stated in the annual report on Oct 11 that ‘there is more work to do and increasing the official cash rates the most effective way we can reduce inflation and support maximum sustainable employment’. This hawkish comment was reflected in the terminal rate which is currently set to be just under 5% for May 2023 next year.

This divergence should favour AUDNZD selling in the near term with a divergence in the central banks’ move relative to the market’s pricing for their rate decisions.

Major trade risks: The major risk here is if the RBA or the RBNZ make any significant announcements that change this outlook.

Learn more about HYCM

Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.