The AUD/NZD exchange rate has moved into positive territory for the fourth consecutive day, showing some recovery after dipping to around 1.2065. It has now reached a high not seen since July 9 during the Asian trading hours on Monday. However, the current spot prices are struggling to maintain this positive momentum, sitting just above the 1.2100 level as traders hold back, likely due to the anticipation of important economic data and central bank events later in the week.
Australia is set to release its GDP report for the June quarter on Wednesday, right before the Reserve Bank of New Zealand (RBNZ) announces its monetary policy decision. Notably, the NZIER Monetary Policy Shadow Board has indicated an expected increase of 25 basis points (bps) in the official cash rate (OCR) by the RBNZ in September. Traders are also looking for indications of further rate hikes by the end of the year, which could positively influence the New Zealand Dollar (NZD) and limit the rally of the AUD/NZD pair.
Conversely, the Australian Dollar (AUD) is gaining strength, bolstered by a more hawkish stance from the Reserve Bank of Australia (RBA). RBA Governor Michele Bullock recently stated in a press conference that there are no plans for a rate cut, and additional tightening could be “quite possible” if inflation does not decrease as expected. This sentiment was reflected in the minutes from the August RBA meeting released last week, and alongside China’s surprisingly strong PMI data, it supports the AUD and the AUD/NZD pairing.
China’s National Bureau of Statistics (NBS) reported that the Manufacturing PMI increased to 49.8 in August, up from 49.2 in the previous month and above expectations of 49.7. Meanwhile, the Non-Manufacturing PMI remained stable at 49.0. Although these indices show some improvement, they are still below the critical 50 mark that indicates growth versus contraction, which is likely preventing AUD bulls from making more aggressive moves, thus keeping a cap on the AUD/NZD cross. Traders might need to exercise some caution before committing to an extension of the current upward trend.
(A correction was made on August 31 at 03:03 to ensure the asset name is AUD/NZD, rather than AUD/USD in the initial bullet point.)
