AUD/NZD reaches three-year highs near 1.1450 following the RBNZ policy decision

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AUD/NZD extends its gains for the third successive session, trading around 1.1430 during the Asian hours on Wednesday.

AUD/NZD marked 1.1445, the highest since September 2022, on Wednesday.
The Reserve Bank of New Zealand surprisingly decided to cut the Official Cash Rate by 50 basis points to 2.50% in October.
The Australian Dollar gained support amid the cautious stance of the Reserve Bank of Australia.

AUD/NZD extends its gains for the third successive session, trading around 1.1430 during the Asian hours on Wednesday. The currency cross reached 1.1445, the highest since September 2022, after the Reserve Bank of New Zealand (RBNZ) decided to cut the Official Cash Rate (OCR) by 50 basis points (bps) to 2.50% from 3.00% at its October policy meeting. The decision came as a surprise to markets, which had widely expected the RBNZ to cut the OCR by 25 bps.

The AUD/NZD cross appreciated as the Australian Dollar (AUD) received support from the cautious stance surrounding the Reserve Bank of Australia (RBA). The Australian central bank decided to keep its Official Cash Rate (OCR) unchanged at 3.6% at the September monetary policy meeting. The RBA warned that inflation has proven more persistent than expected, especially in market services, while the labor market remains tight.

University of Melbourne reported on Tuesday that Australia’s Westpac Consumer Confidence declined 3.5% month-over-month (MoM) to 92.1 in October, a sharper decline than the previous 3.1% fall, marking the fastest drop since April. ANZ Job Advertisements slipped 3.3% MoM in September, a much steeper drop than the previous decline of 0.3%.

The TD-MI Inflation Gauge data released on Monday suggested that inflation may come in hotter than anticipated in the third quarter, despite the Reserve Bank of Australia's efforts to keep inflation within its 2–3% target range. Furthermore, Australia’s Consumer Inflation Expectations will be eyed on Thursday.

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.

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