AUD/NZD tumbles to near 1.1430 as RBNZ cuts OCR by 25 bps to 2.25%, as expected

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The AUD/NZD pair slides vertically to near 1.1430 during the Asian trading session on Wednesday. The pair faces intense selling pressure as the Reserve Bank of New Zealand (RBNZ) has cut its Official Cash Rate (OCR) by 25 basis points (bps) to 2.25%.

AUD/NZD slides 0.5% to near 1.1430 as the RBNZ has reduced its OCR by 25 bps to 2.25%.
The RBNZ was expected to loosen its monetary policy conditions further amid weak job market and declining GDP growth.
Faster-than-expected Australian CPI growth has strengthened the Australian Dollar.

This is the third time in a row when the RBNZ has reduced its interest rates. The New Zealand (NZ) central bank was expected to cut its OCR by quarter-to-a-percent as employment conditions and economic growth have been consistently deteriorating.

In the third quarter of the year, the NZ Unemployment Rate rose to 5.3%, the highest since the same quarter of 2020. And, the Gross Domestic Product (GDP) was contracted by 0.9% in the second quarter.

On the other hand, the Australian Dollar (AUD) has been outperforming its peers as the Aussie’s Consumer Price Index (CPI) data for October has come in higher-than-projected. Earlier in the day, the Australian Bureau of Statistics (ABS) reported that inflationary pressures rose to 3.8% on an annualized basis. Economists expected the CPI data to come in higher at 3.6% from 3.5% in September.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.02%	-0.04%	0.16%	-0.07%	-0.25%	-0.89%	0.03%
EUR	0.02%		-0.03%	0.18%	-0.06%	-0.24%	-0.86%	0.05%
GBP	0.04%	0.03%		0.21%	-0.03%	-0.21%	-0.84%	0.07%
JPY	-0.16%	-0.18%	-0.21%		-0.23%	-0.41%	-1.05%	-0.14%
CAD	0.07%	0.06%	0.03%	0.23%		-0.18%	-0.81%	0.10%
AUD	0.25%	0.24%	0.21%	0.41%	0.18%		-0.63%	0.27%
NZD	0.89%	0.86%	0.84%	1.05%	0.81%	0.63%		0.91%
CHF	-0.03%	-0.05%	-0.07%	0.14%	-0.10%	-0.27%	-0.91%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

The scenario of price pressures accelerating is likely to undermine expectations of any interest rate cut by the Reserve Bank of Australia (RBA) in the near term. Earlier this month, the RBA kept its OCR steady at 3.6%, citing upside inflation risks.

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.