AUD/NZD refreshes monthly low below 1.0850 as Australian CPI softens and GDP trims

The AUD/NZD pair has been significantly offered by the market participants after a sheer drop in the Australian monthly Consumer Price Index (CPI) data. Longer-period patience from Reserve Bank of Australia (RBA) policymakers looks fruitful now as the monthly CPI has dropped dramatically to 7.4% from the consensus of 8.0% and the prior release of 8.4%.

The street was considering the Australian economy as a laggard in the FX domain, which has not shown signs of deceleration in the pace of soaring inflation yet. No doubt, RBA Governor Philip Lowe has already pushed the Official Cash Rate (OCR) to 3.35% to bring down sticky inflation, more rate hikes are still favored as it would be premature considering a victory in the battle against galloping price pressures.

Apart from the Australian inflation data, Gross Domestic Product (GDP) (Q4) figures landed lower than anticipation. The Australian Bureau of Statistics has reported a decline in the GDP (Q4) data to 0.5% from the consensus of 0.8% and Q3 figure of 0.6%. On an annualized basis, the GDP has remained in line with expectations at 2.7%. A decline in GDP numbers also showcases lower demand from households, which will trim inflation projections ahead.

The New Zealand Dollar and the Australian Dollar will remain in action amid the release of the Caixin Manufacturing PMI data. As per the estimates, the IHS Markit will report an improvement in the economic data to 50.2 against the prior release of 49.2.

This week, New Zealand’s Retail Sales (Q4) data contracted by 0.6% while the street was expecting an expansion of 1.5%. A decline in the households’ demand is likely to soften kiwi inflation ahead as firms will be forced to offer products and services at lower prices to match the current demand levels.