The Australian Dollar New Zealand Dollar (AUD NZD) slipped close to a six-month low this morning as investors welcomed an optimistic economic outlook from the Reserve Bank of New Zealand (RBNZ) following its latest monetary policy meeting.
New Zealand Dollar (NZD) Strengthens After RBNZ Policy Meeting
Demand for the New Zealand Dollar surged on Thursday despite the RBNZ voting to leave interest rates on hold at 1.75% and signalling that they would likely remain on hold for ‘a considerable period’.
Investors were instead upbeat as the bank presented a rather optimistic outlook for the economy its accompanying statement, saying;
‘GDP growth in the March quarter was lower than expected, with weaker export volumes and residential construction partially offset by stronger consumption.’
‘Nevertheless, the growth outlook remains positive, supported by accommodative monetary policy, strong population growth, and high terms of trade’, adding that ‘recent changes announced in Budget 2017 should support the outlook for growth’.
The RBNZ was also positive in its outlook towards future inflation, suggesting that a gradual rise in wages would help to hold headline inflation within in the Bank’s target range over the ‘medium term’.
Rising Iron Ore Prices Help to Stem AUD losses, but will Price Crash again?
The Australian Dollar was able to cushion its decent against the ‘Kiwi’ on Thursday thanks to a slight rise in iron ore prices, with the commodity seeing its longest string of gains since late 2015.
However analysts are wary that prices for Australia’s largest export are unlikely to continue to rise for much longer and certainly won’t reach the dizzying heights seen at the start of year.
The theory is largely driven by the continued fall in Chinese steel prices, for which the iron ore market is closely tied, with demand for Chinese rebar tempered, despite rising production.
AUD NZD Forecast: Australian Home Sales Figures Ahead
Australia will release its latest New Home Sales data on Friday which may cause the AUD NZD exchange rate to strengthen if sales growth remains robust.
Meanwhile the next piece of notable domestic data for the New Zealand Dollar will likely be the Trade Balance figures at the start of next week, with the ‘Kiwi’ likely to extend its recent gains if New Zealand’s trade surplus continued to expand in May.
Current Interbank Exchange Rates
At the time of writing the AUD/NZD exchange rate was trending around 1.0396 and the NZD/AUD exchange rate was trending around 0.9616