AUD/NZD Exchange Rate Forecast to Decline after RBNZ Hold Rates
After the Reserve Bank of New Zealand (RBNZ) surprised markets by avoiding an overnight cash rate cut, the New Zealand Dollar rallied versus its major peers, including the Australian Dollar.
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AUD Exchange Rates Tick Higher as Market Sentiment Improves
The Australian Dollar edged higher versus a number of its major peers overnight, despite registering less-than-ideal domestic data results. First quarter Export and Import Prices both declined beyond expectations on a quarterly basis.
The ‘Aussie’ (AUD) uptrend can be attributed to the combination of a weak US Dollar and improved market sentiment. The US Dollar plunged after Fed Chairwoman Janet Yellen called for patience with regard to tighter monetary policy. This caused traders to delay bets of a Fed interest rate hike.
Market sentiment improved following news that the Bank of Japan (BoJ) avoided cutting the benchmark rate, much to the surprise of most analysts. Rising crude oil prices also supported risk-appetite.
During Thursday’s European session, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate softened by around 0.3%.
NZD Exchange Rates Rally on US Dollar Weakness
The Reserve Bank of New Zealand’s (RBNZ) surprise move to hold the overnight cash rate sent the ‘Kiwi’ (NZD) soaring versus its major peers. Prior to the decision, interest rate futures predicted a 50% chance that the central bank would ease policy.
The accompanying statement was somewhat dovish, however, and increased speculation that the RBNZ will cut rates again in 2016 as Charles St-Arnaud, Research Analyst at Nomura, explains;
‘The RBNZ kept its policy rate unchanged at 2.25%, against our expectations, but maintained a dovish policy stance, stating that “further policy easing may be required to ensure that future average inflation settles near the middle of the target range”. The RBNZ reiterated that that the outlook for the global economy has deteriorated, but observed that “monetary conditions are extremely accommodative internationally”. Moreover, the central bank continues to view the “the prospects for global growth, particularly around China, and the outlook for global financial markets” as a significant downside risks to the outlook.’
Also highly supportive of ‘Kiwi’ (NZD) gains is the weak US Dollar as traders pare bets regarding the timing of a Federal Reserve interest rate hike.
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate was trending in the region of 1.0950 during Thursday’s European session.
AUD/NZD Exchange Rate Forecast to Hold Losses ahead of NZ Business Confidence Report
The AUD/NZD exchange rate is likely to hold losses as traders await data pertaining to both Australia and New Zealand this morning.
New Zealand’s Business Confidence data and Australia’s Private Sector Credit report will be the most likely publications to provoke volatility.
Market sentiment and US Dollar positioning will also be likely to play a part in AUD/NZD exchange rate movement today.
At the close of Thursday’s European session, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate was trending within the range of 1.0920 to 1.0997.