AUD/NZD edges lower toward 1.2150 as RBNZ keeps OCR unchanged

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AUD/NZD trades around 1.2170 during the Asian hours on Wednesday, halting its winning streak that began on March 30.

AUD/NZD slips as the New Zealand Dollar gains after the RBNZ held Official Cash Rate at 2.25% in April.
Traders await RBNZ Governor Dr. Anna Breman’s speech at the post-policy press conference for further guidance.
Trump agreed to a two-week ceasefire with Iran, conditional on reopening the Strait of Hormuz.

AUD/NZD trades around 1.2170 during the Asian hours on Wednesday, halting its winning streak that began on March 30. The currency cross inches lower as the New Zealand Dollar (NZD) receives support after the Reserve Bank of New Zealand decided to keep its Official Cash Rate (OCR) unchanged at 2.25% at its April monetary policy meeting.

Traders widely expected the RBNZ to maintain its policy rates due to uncertain economic and inflation outlook, which could be attributed to the rising oil prices due to the Middle East conflict. Traders will likely observe the RBNZ Governor Dr. Anna Breman’s speech at the post-monetary policy meeting press conference due later in the day.

The AUD/NZD cross advances as the Australian Dollar (AUD) strengthens amid improved global risk sentiment after US President Donald Trump announced a two-week pause in military action against Iran. The decision, made just before a deadline for intensified strikes, includes a “double-sided ceasefire” tied to Iran reopening the Strait of Hormuz.

The US-Iran ceasefire may alter the inflation outlook, easing pressure on the Reserve Bank of Australia (RBA) to tighten further. Markets had priced a rate hike toward 4.35% at the May meeting, partly due to elevated energy costs following the Strait’s closure.

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after each of its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by interim Governor Christian Hawkesby's press conference.