Cooling Australian inflation and weak jobs data reduce RBA rate hike bets, pressuring the cross toward 1.20.
The Australian Dollar slumped more than 1.2% against the New Zealand Dollar on Wednesday, its steepest daily drop since late 2019. Softer-than-expected Australian inflation and employment figures have led markets to pare back Reserve Bank of Australia rate hike expectations.
The Reserve Bank of New Zealand’s hawkish stance contrasts sharply, bolstering the Kiwi. Analysts note the narrowing interest rate differential between the two central banks is eroding support for the AUD/NZD cross. The pair retreated from a 13-year high, with a break below the 50-day moving average at 1.2130 targeting 1.20.
Cooling domestic indicators give the RBA room to pause its tightening cycle, while the RBNZ’s surprise hawkish tilt widens the policy divergence. Major financial institutions now project a weaker outlook for the Australian Dollar relative to its antipodean counterpart.