AUD/NZD trades around 1.0400 level, the kiwi may prove resilience
- The Antipodeans remain relatively weaker against the US dollar, the kiwi less so.
- AUD/NZD awaits RBNZ Inflation Expectations data, Luci Ellis speech.
- The kiwi is resilient amidst the most aggressive rate hike cycle.
AUD/NZD is trading at 1.0383, up 0.06%, rebounding after Wednesday FX action. The spot may be reacting hot and cold in line with the Reserve Bank of Australia's (RBAs) latest announcement for borrowers with jobs. RBA governor Philip Lowe iterated an official interest rate hike is very unlikely in 2022 and may still not happen until 2024.
Recently, the kiwi dollar has had too much of a good thing. Rising rate hike probabilities from the Reserve Bank of New Zealand (RBNZ) is one of them, but it can be a source of weakness for the pair's health. Rates markets are pricing in a 25-bps rate hike at each RBNZ meeting through the end of 2022. Many experts say it would be the most aggressive rate hike cycle by any major central bank since the post-global Financial Crisis era.
Analysts at Goldman Sachs feel the Antipodeans are likely to remain weaker against the US dollar, but the kiwi's resilience will prosper.
The investment bank said, "Our views on the RBA are fairly dovish, as the economy faces softer wage and inflation dynamics and risks from a potential slowdown in Chinese growth. Our forecasts for AUD, as a result, are fairly negative versus USD over a 12-month horizon."
"In contrast, our forecasts for the RBNZ are far less dovish, though our projections of the terminal rate are lower than market expectations, and we expect NZD to be dragged down vs USD along with AUD," it added.
AUD/NZD traders will now look ahead to RBNZ Inflation Expectations for the fourth quarter and RBA Assistant Governor Luci Ellis' speech for further incentive.