RBA vs RBNZ Monetary Divergence Wanes

AUD, NZD Analysis & News

RBNZ Stands Pat as Expected
RBA Easing May Coincide with Australian Federal Budget
AUD/NZD Monetary Policy Divergence Play Wanes

RBNZ Recap: As widely expected, the RBNZ maintained current policy and forward guidance, prompting an initial bid in the Kiwi. Alongside this, the RBNZ reiterated that further stimulus will likely come in the way of bank funding for lending programme before additional rate cuts. However, with the macro backdrop the dominant driver at present, the blip higher had been quickly retraced.

of clients are net long.

of clients are net short.

Change in	Longs	Shorts	OI
Daily	12%	2%	5%
Weekly	-23%	12%	-3%

RBA Easing on the Horizon: Recent commentary from RBA Deputy Governor Debelle has fuelled expectations that the central bank may provide another stimulus package as soon as October. The rate setter had outlined policy tools that were at the central banks disposal, including an additional rate cut of up to 15bps without going into negative territory, while also purchasing bonds further out the curve. In turn, the dovish speech has been met with a flurry of calls for RBA action at the upcoming meeting, which will also coincide with the Federal Budget (Oct 6th).

of clients are net long.

of clients are net short.

Change in	Longs	Shorts	OI
Daily	9%	-5%	2%
Weekly	8%	-16%	-6%

AUD/NZD Policy Divergence Waning

That said, with the RBA potentially easing in the short term, the narrative of RBA/RBNZ monetary policy divergence has waned, thus AUD/NZD may struggle for upside. Despite the bounce from circa 1.0750, momentum remains tilted to the downside, as such, a break below opens the door for a pullback towards 1.06, particularly on the back of falling equity markets. On the upside, topside resistance is situated at 1.0850-60, in which a close above would negate the downside bias.

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