AUD/NZD sticks to intraday gains around 1.0800 after RBNZ’s expected 25 bps rate cut

AUD/NZD attracts fresh buyers following the previous day’s two-way price swings.
The intraday uptick lacks follow-through amid the escalating US-China trade war.
The RBNZ cuts its key policy rates by 25 bps, though it does little to provide impetus.

Haresh Menghani FXStreet

The AUD/NZD cross regains positive traction during the Asian session on Wednesday, though it struggles to capitalize on the move and remains confined in the previous day's broader range. Spot prices retreat a few pips after the Reserve Bank of New Zealand (RBNZ) announced its policy decision and currently trade around the 1.0800 mark.

As was widely expected, the RBNZ delivered a 25 basis point (bps) cut to the Official Cash Rate (OCR), bringing it down to 3.50% following the April monetary policy meeting. The market reaction, however, seems muted as the decision to lower the key policy rate for the fifth consecutive time was fully priced in. Hence, investors will closely scrutinize the language in the RBNZ’s policy statement for fresh insights on future rate cuts, which could significantly impact the performance of the New Zealand Dollar (NZD) and the AUD/NZD cross.

Meanwhile, a further escalation of the US-China trade war holds back traders from placing aggressive bullish bets around the Australian Dollar (AUD) and caps the upside for spot prices. In fact, the White House press secretary Karoline Leavitt confirmed on Tuesday that the US will proceed with a sweeping 104% tariff on Chinese imports starting today. This warrants some caution before confirming that the AUD/NZD cross has bottomed out and positioning for any recovery from over a one-year low, around the 1.0700 mark touched on Monday.

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.

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Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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