AUD/NZD sticks to modest gains near one-week top, around 1.1030 area post-RBA

AUD/NZD rallies around 45 pips intraday following the release of the upbeat Chinese PMI print.
The RBA’s on-hold rate decision and hawkish outlook do little to provide any meaningful impetus.
Bets for more aggressive RBNZ interest rate cuts favor bulls ahead of NZ jobs data on Wednesday.

Haresh Menghani FXStreet

The AUD/NZD cross reverses an Asian session dip to the 1.0990 region and rallies to a one-week top on Tuesday in reaction to the upbeat Chinese data. Spot prices stick to modest intraday gains around the 1.1030 area and move little after the Reserve Bank of Australia (RBA) announced its policy decisions.

Data published earlier this Tuesday showed that business activity in China's services sector expanded at the fastest pace in three months during October and the Caixin/S&P Global Services PMI rose from 50.3 in September to 52. This was consistent with the official PMIs released last week and could be seen as an early sign that China's big stimulus push is helping improve business conditions, which, in turn, provides a goodish lift to the Australian Dollar (AUD).

The New Zealand Dollar (NZD), on the other hand, continues with its relative underperformance in the wake of rising bets for more aggressive interest rate cuts by the Reserve Bank of New Zealand (RBNZ). The expectations were reaffirmed by RBNZ's semi-annual Financial Stability Report, which indicated that the economic conditions remain challenging and also warned about the impact of geopolitical tensions on the economy.

The report further stated that rising unemployment is starting to create acute financial difficulties for some households. Adding to this, RBNZ Governor Adrian Orr said that the real economy is lagging reduction in interest rates. Meanwhile, the RBA's widely anticipated decision to leave the cash rate unchanged at 4.35% and hawkish outlook did little to impress the AUD bulls or provide any meaningful impetus to the AUD/NZD cross.

In the post-meeting press conference, RBA Governor Michele Bullock reiterated that there are still risks on the upside for inflation and that rates need to stay restrictive for the time being. This, in turn, suggests that the path of least resistance for the AUD/NZD cross remains to the upside. Investors now look forward to the release of the quarterly employment report on Wednesday, which could determine the near-term trajectory for the currency pair.

Economic Indicator

RBA Interest Rate Decision

The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.

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