AUD/NZD rises toward 1.1200 following RBNZ rate-cut decision

AUD/NZD appreciated as the RBNZ lowered its Official Cash Rate by 50 basis points on Wednesday.
Traders will closely monitor RBNZ Governor Adrian Orr’s press conference for clues on the central bank’s future policy direction.
Australia's Wage Price Index increased by 0.7% QoQ in Q4 2024, missing the expected 0.8% rise.

Akhtar Faruqui FXStreet

AUD/NZD extends its gains for the second successive session, trading around 1.1170 during Asian hours. The upside is driven by the Reserve Bank of New Zealand’s (RBNZ) decision to lower the Official Cash Rate (OCR) by 50 basis points (bps) from 4.25% to 3.75%, following the conclusion of the February policy meeting on Wednesday. The decision aligned with the market expectations.

Traders will closely watch RBNZ Governor Adrian Orr’s press conference for insights into the central bank’s future policy stance. Any dovish signals could add to selling pressure on the New Zealand Dollar (NZD), providing support for the AUD/NZD cross.

However, the upside of the AUD/NZD cross could be restrained as the Australian Dollar (AUD) remains subdued following the Reserve Bank of Australia’s (RBA) policy decision on Tuesday. The central bank lowered its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10% on Tuesday, as widely expected, marking the first rate cut in four years.

Reserve Bank of Australia Governor Michele Bullock addressed the media after the policy meeting, stating that it’s clear high interest rates have had an impact. However, Bullock emphasized that it's too early to declare victory over inflation. She also noted the unexpectedly strong jobs market and clarified that the market's expectation of further rate cuts is not guaranteed.

Australia's Wage Price Index rose by 0.7% quarter-over-quarter in Q4 2024, below the expected 0.8% increase and the previous quarter's 0.9% rise. On an annual basis, the index grew by 3.2%, slowing from a revised 3.6% in the prior quarter and matching forecasts. This marked the slowest wage growth since Q3 2022.

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after 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 Governor Adrian Orr’s press conference.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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