The AUD/NZD currency pair turned positive for the fourth consecutive day, reaching its highest level since July 9 during the Asian session on Monday, before retreating slightly to trade just above the 1.2100 mark. This movement comes as traders exercise caution ahead of two key events this week: the release of Australia's June-quarter Gross Domestic Product (GDP) report on Wednesday and the Reserve Bank of New Zealand's (RBNZ) monetary policy decision immediately afterward [1].
Market expectations are being shaped by the NZIER Monetary Policy Shadow Board, which suggested that the RBNZ will raise the Official Cash Rate (OCR) by 25 basis points in September. Additionally, traders anticipate the RBNZ will signal the possibility of a further rate hike by year-end, a scenario that is providing support for the New Zealand Dollar (NZD) and capping gains in the AUD/NZD pair [1].
On the Australian side, the Reserve Bank of Australia (RBA) maintains a hawkish stance. RBA Governor Michele Bullock stated in a press conference that a rate cut is not currently being considered and that further tightening remains 'quite possible' if inflation does not cool as projected. This sentiment was echoed in the minutes from the August RBA meeting, released last Tuesday. The Australian Dollar (AUD) also found some support from China's better-than-expected Purchasing Managers' Index (PMI) data, with the National Bureau of Statistics (NBS) reporting a Manufacturing PMI of 49.8 in August (up from 49.2 and above the consensus of 49.7) and a Non-Manufacturing PMI steady at 49.0. However, both readings remain below the 50 threshold that separates growth from contraction, which has limited aggressive buying of the AUD and capped the AUD/NZD cross [1].
The upcoming Australian GDP report is expected to show a quarter-on-quarter growth of 0.3%, matching the previous reading, according to consensus estimates. The outcome of this release, along with the RBNZ's policy signals, is likely to determine the near-term direction of the AUD/NZD pair [1].
CONCLUSION
The AUD/NZD pair is trading near recent highs as markets await critical economic data and central bank decisions from both Australia and New Zealand. While the RBA's hawkish stance supports the Aussie, expectations of RBNZ tightening are providing a counterbalance. The next moves in the currency pair will likely hinge on the outcomes of the Australian GDP release and the RBNZ's policy guidance.