Divergent central bank policies drive AUD/NZD to its steepest daily drop since 2022 as RBNZ signals aggressive hikes and RBA leans toward pausing.
The AUD/NZD currency pair fell sharply, marking its largest single-day decline since 2022, as the Reserve Bank of New Zealand (RBNZ) delivered a hawkish surprise while the Reserve Bank of Australia (RBA) signaled a potential pause in rate hikes. The RBNZ held its Official Cash Rate at 2.25% but revealed a split 3-3 decision, with a casting vote, and warned of sooner and more aggressive rate increases than previously expected. Markets now price a 73% chance of a July hike.
In contrast, the RBA recently softened its tone after raising rates to 4.35%, with one policymaker dissenting in favor of a pause. Australia’s unemployment rate rose to 4.5%, the highest since late 2021, and April inflation slowed to 4.2%, below RBA estimates. Flash PMIs also indicated weaker economic activity. Traders now see only a 61% probability of another RBA hike by year-end.