Australia’s April CPI miss and the RBNZ’s unchanged stance triggered a sharp sell-off in AUD/NZD, erasing recent gains.
The Australian Dollar fell nearly 2% against the New Zealand Dollar on Wednesday after April’s CPI data undershot expectations. Headline inflation rose 4.2% YoY, below the 4.4% consensus and down from 4.6% in March. The monthly print of 0.4% also missed estimates, weakening the case for prolonged RBA tightening.
AUD/NZD had climbed to generational highs near 1.2300, driven by expectations of RBA hawkishness. However, the RBNZ’s decision to hold rates at 2.25% and its neutral policy statement offered no support for easing bets, further pressuring the cross.
Front-end Aussie rates softened on the CPI miss, removing a key pillar of support for the currency pair. The cross dropped below 1.2200 as traders reassessed the divergence narrative.