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Australian Dollar Trades Tightly against New Zealand Dollar as Confidence Slips

New Zealand Dollar Exchange Rates

The Australian Dollar to New Zealand Dollar exchange rate has been tight today, ahead of a key Reserve Bank of New Zealand (RBNZ) policy meeting.

Today’s mixed data releases have still left the AUD NZD exchange rate at a historic advantage, with the pairing hitting the best rate since late July.

Australian Uncertainty Persists after Disappointing Westpac Confidence Score

For the ninth month in a row, the Westpac consumer confidence index has shown that pessimism outweighs optimism.

This news has kept the Australian Dollar trading tightly against the New Zealand Dollar, effectively preventing a rally due to its negative implications.

Giving an analysis of the news, Westpac economists stated;

‘We have not seen such a succession of weak reads since 2008. The survey detail suggests increased pressures on family finances, concerns around interest rates, and housing affordability in NSW and Victoria are more than outweighing increased confidence around jobs’.

New Zealand Dollar Declines on Dovish RBNZ Forecasts

Instead of past data, the New Zealand Dollar has instead declined today due an upcoming Reserve Bank of New Zealand (RBNZ) interest rate decision.

Economists don’t expect an interest rate, or ‘official cash rate’ (OCR) hike from RBNZ officials, but the greater worry is that departing Governor Graeme Wheeler will reject the idea of any near-term rate hikes.

Giving a prediction, ANZ Bank economists Cameron Bagrie and Philip Borkin have made a neutral forecast;

‘We doubt he’ll rattle the cage, with the tone of the accompanying statement, projections and press confidence to reinforce the RBNZ’s cautious, watchful and neutral stance’.

On the other hand, ASB Bank Chief Economist Nick Tuffley expects a longer wait until the next rate hike;

‘We expect the RBNZ to sound a more cautionary tone in the August Monetary Policy Statement. The balance of events since the June OCR decision point to less inflation pressure.

As a result, the RBNZ’s OCR forecast track is likely to show rate increases will occur in early 2020, 3-6 months later than in its May forecasts. We also don’t completely rule out the RBNZ lowering its 2017/18 OCR forecasts slightly if it wanted to signal that there is a higher risk that it cuts the OCR over the next year’.

In any event, it seems unlikely that Wheeler will suddenly turn hawkish, so the New Zealand Dollar may be destined to decline in the near-future.

Imminent RBNZ Interest Rate Decision could Improve AUD NZD Exchange Rate

As covered in the New Zealand Dollar section, the main event in the future will be the RBNZ interest rate decision and policy meeting.

This has a chance of devaluing the New Zealand Dollar, opening the door for an AUD NZD advance.

The other NZ news this week will come on Friday, when the national business PMI measure is announced. This is set to rise from 56.2 points to 56.5, which would indicate a slight increase in national business activity.

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 1.0773 and the New Zealand Dollar to Australian Dollar (NZD AUD) exchange rate was trading at 0.9278.