Neutral Tone of RBA Continues to Weigh on AUD/NZD
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate held close to a six-month low on Wednesday as the pairing remains subdued in wake of the RBA policy meeting.
At the time of writing AUD/NZD has fallen around 0.2%, bringing the pairing’s losses to over a cent so far this week.
Australian Dollar (AUD) Muted as RBA Favours Neutral Outlook on Policy
The Australian Dollar remained on the back foot on Wednesday as investors picked apart the Reserve Bank of Australia’s (RBA) policy statement following Tuesday’s rate decision.
While it was no surprise that the RBA chose to leave interest rates at 1.5% this month, markets were disappointed by the neutral tone struck in its outlook for the coming year.
Recent speculation of a rate hike in 2018 had prompted some investors to hope for a more hawkish tone on Tuesday, but were left disappointed as it made indications that it would seek to tightening monetary policy in the foreseeable future.
The final paragraph of the RBA statement read;
‘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.’
Economists suggests that while the language used by the bank does indeed hint that the next move will be a hike, that it is likely to be someway off yet.
New Zealand Dollar (NZD) Strengthened by Surprise Dip in Unemployment
At the same time while the New Zealand Dollar was bolstered during the Asian session on Wednesday by the publication of New Zealand’s latest labour report.
According to data released by Statistics New Zealand (Stats NZ), the unemployment rate unexpectedly dropped from 4.6% to 4.5% in the fourth quarter. Reaching its lowest levels in nine years.
However slightly undermining the drop in unemployment were the accompanying wage growth figures, with average earning only rising 0.4% down from 0.6% in the third quarter.
AUD/NZD Forecast: RBNZ to Leave Rates on Hold?
Looking ahead the AUD/NZD exchange rate may rebound during Thursday’s session as the Reserve Bank of New Zealand (RBNZ) holds its own policy meeting.
With the bank expected to nether hike rates nor alter its neutral monetary policy outlook the meeting is likely to result in some weakness for the New Zealand Dollar (NZD).
Meanwhile the Australian Dollar may witness some volatility in the second half of this week’s session depending on the tone struck in the RBA’s quarterly statement on Friday.