Cautious RBA Outlook Causes -0.5% Australian Dollar to New Zealand Dollar Exchange Rate Decline
The Australian Dollar (AUD) has fallen by -0.5% against the New Zealand Dollar (NZD) today, following the release of Reserve Bank of Australia (RBA) minutes.
Trading at a level of NZ$1.0866, the Australian Dollar is near its lowest level of trading against the New Zealand Dollar in just over a week.
The RBA minutes have shown that the Australian central bank is still cautious about adjusting monetary policy, so interest rates may remain unchanged for many months to come.
Responding to the RBA minutes, Capital Economics’ Paul Dales said:
‘The minutes of the Reserve Bank of Australia’s July meeting confirm that the bank is a long way from raising interest rates and that it is worrying more about a global trade war, the slowdown in China and the high level of domestic debt at home.’
Stressing that ‘caution’ could be the RBA’s watchword in the future, Mr Dales added:
‘If anything, July’s minutes support other evidence that the RBA is becoming a bit more concerned about the outlook.’
A more cautious outlook from the RBA decreases the odds of a near-term interest rate hike, which is the primary cause of Australian Dollar exchange rate losses today.
New Zealand Dollar to Australian Dollar (NZD/AUD) Exchange Rate Rises on Higher NZ Inflation Rates
The New Zealand Dollar (NZD) has risen by 0.6% against the Australian Dollar (AUD) today, hitting an exchange rate of AU$0.9200.
This advance for the NZD is down to last night’s inflation rate figures, which covered changes to price growth in Q2 2018.
The readings showed an unexpected slowdown in the quarterly inflation rate, while the annual reading rose but not by as much as forecast.
At 1.5%, annual inflation is currently at the midpoint of the Reserve Bank of New Zealand’s (RBNZ) 1-3% target range.
NZD traders don’t believe that an RBNZ interest rate hike is incoming after this data release, but the stats have still increased the likelihood of an eventual rate hike.
Higher inflation puts pressure on central banks to boost interest rates, as this encourages households to save instead of spend and can lead to slowing price growth.
Australian Dollar to New Zealand Dollar Exchange Rate Forecast: Will AUD/NZD Losses Worsen on Dairy Data?
Looking at the rest of the day’s economic events, there is a risk of further Australian Dollar to New Zealand Dollar exchange rate losses when dairy price data comes out.
This will be the Global Dairy Trade dairy price index, which measures changes to global dairy prices.
The reading previously showed a -0.5% drop, but could raise the NZD if it shows a significant positive reading today.
Dairy price growth benefits the NZ economy, as it means that national dairy farmers and exporters can get a better price for their products.
On the other side of the equation, the Australian Dollar (AUD) could recover against the New Zealand Dollar (NZD) on Thursday when AU jobs market data comes out.
The morning will bring employment and unemployment rate figures, which are tipped to show more persons in employment and no change, respectively.
If there are more people with work and the unemployment rate unexpectedly drops, the Australian Dollar could advance against the New Zealand Dollar.