The AUD/NZD cross reversed an earlier dip during the Asian session, rising to a one-week high on Tuesday, buoyed by positive economic data from China. Spot prices held steady around the 1.1030 mark, showing modest intraday gains after the Reserve Bank of Australia (RBA) announced its latest policy decisions.
Data released earlier on Tuesday indicated that business activity in China’s services sector expanded at its fastest rate in three months during October, with the Caixin/S&P Global Services PMI climbing from 50.3 in September to 52. This aligns with official PMI figures released last week and suggests that China’s substantial stimulus efforts are beginning to enhance business conditions, providing a supportive boost to the Australian Dollar (AUD).
Conversely, the New Zealand Dollar (NZD) continued to struggle, reflecting growing expectations for more aggressive interest rate cuts by the Reserve Bank of New Zealand (RBNZ). These expectations were reinforced by the RBNZ’s semi-annual Financial Stability Report, which highlighted ongoing economic challenges and warned of the adverse impacts of geopolitical tensions on the economy. The report noted that rising unemployment is beginning to create significant financial difficulties for some households. RBNZ Governor Adrian Orr further emphasized that the real economy is lagging behind the recent reductions in interest rates.
While the RBA maintained its cash rate at 4.35% with a hawkish outlook, the decision failed to ignite enthusiasm among AUD bulls or provide substantial momentum for the AUD/NZD cross. In a post-meeting press conference, RBA Governor Michele Bullock reiterated concerns about persistent inflationary risks, stating that interest rates must remain restrictive for the time being. This indicates that the AUD/NZD cross may continue its upward trend.
Investors are now anticipating the release of the quarterly employment report on Wednesday, which is likely to influence the near-term direction of the currency pair.
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