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Australian Dollar to New Zealand Dollar Exchange Rate Tight after RBA’s Policy Statement

Australian Dollar Exchange Rates

RBA Focus on AU Wage Growth Leaves AUD/NZD Exchange Rate Close

The Australian Dollar to New Zealand Dollar exchange rate has been flat today; this narrow trading comes after the latest Reserve Bank of Australia (RBA) policy statement.

The RBA’s quarterly bulletin indicates that the bank is concerned about relatively low inflation in 2018, which might mean that an interest rate hike is off the table.

The last increase to Australian interest rates was back in November 2010; since then Australia’s official cash rate (OCR) has been cut down to the present 1.50%.

Another issue for the RBA has been wage growth, which the bank predicts will only pick up gradually over the rest of the year.

Summarising this cautious outlook, CBA Senior Economist Gareth Aird has said;

‘The RBA continues to expect growth to lift a little over the next two years. And inflation is expected to rise “gradually”.

The Bank’s forecast profile for both inflation and growth are unchanged from…November, as expected.

The RBA’s extensive use of the word “gradual” in the Statement is a signal that the Board is in no hurry to lift the cash rate despite the overall economy continuing to improve’.

New Zealand Dollar to Australian Dollar Exchange Rate Tight despite Optimistic Future Forecast

The New Zealand Dollar has been in the same position as the Australian Dollar today, trading in a narrow range because of limited trader interest in either currency.

The NZD has continued to trade tightly despite long-term optimism from Westpac, where economists have predicted that;

‘We’re still left with a picture of softening momentum in economic activity during 2017.

Looking to the next few years, we expect significant changes in the economic landscape, in large part due to changes in government policy – with growth to be boosted over 2019 and 2020, following some near-term slowing in 2018’.

The only other NZ data to refer to has covered the ANZ truckometer, a measure of road freight which has implications for national GDP readings.

Looking at the stats, ANZ Chief Economist Sharon Zollner said;

‘The ANZ Heavy Traffic Index rose 4.1% in January, reversing much of its 4.4% fall the previous month, and reinforcing a positive trend.

Due to a strong performance in October and November the Index suggests the economy grew solidly in Q4, despite the dip in the December month.

The lift in January is a good start to the New Year’.

Australian Dollar to New Zealand Dollar Advance Possible on AU Jobs Data

In the coming week, the Australian Dollar could rally against the New Zealand Dollar when AU data is released on 15th February.

The unemployment rate figure for January is tipped to show a reduction from 5.5% to 5.3%, which could boost demand for the Australian Dollar.

Lower unemployment has positive implications for future Australian wage growth, which may be acknowledged by Reserve Bank of Australia (RBA) policymakers.

The week ahead will bring less important NZ news; the main announcement will be a business activity measure out on 15th February.

A small increase in the reading has been forecast, which could lead to the New Zealand Dollar firming against the Australian Dollar.