The Australian Dollar has made a slight rise against the New Zealand Dollar recently, but has fallen against other currencies on the implication that there will be no near-term Reserve Bank of Australia (RBA) interest rate hike.
Slow and Steady RBA Outlook Lowers AU Economic Confidence
The Australian Dollar has made minor gains against the New Zealand Dollar today, although mainly due to the NZD’s comparative weakness.
Recent AU news, which has largely devalued the Australian Dollar, has consisted of a Reserve Bank of Australia (RBA) interest rate decision.
The RBA has left interest rates at 1.5% in August and by all indications, this rate is here to stay for the foreseeable future.
The reason this weakened the Australian Dollar so much was that the board of policymakers seemed to be in unanimous agreement that rates should remain on ice. Giving his own statement, RBA Governor Philip Lowe said;
‘The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
Employment growth has been stronger over recent months, and has increased in all states. The various forward-looking indicators point to continued growth in employment over the period ahead. The unemployment rate is expected to decline a little over the next couple of years. Against this, however, wage growth remains low and this is likely to continue for a while yet’.
Low wages have been a consistent barrier to RBA efforts to raise interest rates, which enforces the notion that 1.5% interest may the norm for the time being.
New Zealand Dollar Declines on Falling Dairy Prices
The New Zealand Dollar’s losses today primarily stem from dairy prices, which have proven unsupportive.
On the first day of August, prices dropped by -1.6%. This came after a prior rise of 0.2%, more than erasing any prior gains in the cost of dairy.
On a comparative scale, the drop has been the biggest individual decline in prices since early March.
AUD NZD Decline Possible on AU Trade Balance Stats
Looking ahead this week, the Australian Dollar may lose its slim advantage against the New Zealand Dollar and decline on Thursday.
This is because the AU trade balance is projected to decline on the month, seeing a surplus reduction from 2.471bn to 1.8bn.
The next NZ data will come out sooner, consisting of the unemployment rate measure for Q2. A decline is forecast from 4.9% to 4.8%, which could put unemployment at its lowest rate in over eight years.
If the forecasts prove accurate, the New Zealand Dollar could rally dramatically on the news.
Recent Interbank AUD NZD Exchange Rates
At the time of writing, the Australian Dollar to New Zealand Dollar (AUD NZD) exchange rate was trading at 1.0670 and the New Zealand Dollar to Australian Dollar (NZD AUD) exchange rate was trading at 0.9369.