AUD/NZD plummeted in early Tuesday trading, bottoming at 1.1440 in the wake of the Reserve Bank of Australia (RBA) decision to leave its Official Cash Rate at 3.6%. The result was broadly expected, but policymakers’ tone heaped pressure on the Australian Dollar, which fell against most of its major trading partners. The faster inflation in Q3 led to speculation that the tightening could have continued, but the central bank chose a prudent approach, given that price pressures remain high.
Inflation Concerns Limit AUD Strength
Between July and September, Australian inflation increased from just 2.1% to 3.2%. Even before the formal announcement, investors began placing bets on a complete rate hike by mid-2026 due to rising prices. Things got even murkier when Governor Michele Bullock hinted that more policy tweaks could be on the table if inflation keeps climbing. Now, everyone’s watching Thursday’s labor market data. People expect to see unemployment nudge up and job growth slow down a bit.
NZD Buoyed as RBNZ Seen Completing Easing Cycle
The New Zealand Dollar is relatively more robust by APAC standards. The Reserve Bank of New Zealand (RBNZ) has recently reduced rates to 2.25%, yet markets are increasingly convinced that the cutting cycle is about to end. Anticipation that the central bank will not continue to cut rates has driven NZD higher against most major currencies, maintaining the bearish bias in AUD/NZD pair.
With employment numbers in the U.S. little to report, and Inflation still an issue. Data from Australia will dictate the near-term direction. Until that time, the markets are watching closely for clues from both central banks, as policy divergence is currently dictating pair movement.
