AUD loses ground after RBA and weak data

Unsurprisingly, the Reserve Bank of Australia kept their base rate on hold at 4.1% for the 4th meeting in a row when they met in the early hours of this morning. That was widely forecast by the markets and therefore, largely ignored by traders. However, the new Governor, Michele Bullock suggested further interest rate hikes cannot be ruled out as the central bank tries to tame inflation. Those words ought to have strengthened the Aussie dollar but we also saw a drop in Australian job adverts of 0.1% in the month of September and a drop in building approvals of 6.7% in the year to August, which were worse than the markets had forecast. Hence the GBP/AUD exchange rate, which started to recover on Friday, continues its upward path, peaking just above AUD 1.91 and remaining there this morning. We will get business sentiment indices from Australia’s construction, manufacturing and service sectors overnight tonight. I think it’s fair to say, we can expect further volatility.

RBNZ on hold expected but watch the words

Like their Australian counterparts, the Reserve Bank of New Zealand is expected to maintain its base interest rate at the slightly more elevated level of 5.5%, for the third month in a row when they meet in the early hours of tomorrow morning (UK time). Like the RBA, they are trying to stifle inflation but the headline level in New Zealand has started to correct and the RBNZ is forecasting 4.5% by the end of this calendar year and fall to their target range of 1 to 3% during late 2024. Assuming they do maintain their base rate at 5.5%, the rhetoric used in their statement ought to reiterate that view but that cannot be guaranteed. They, like the RBA, may well talk tough and hint at further rate hikes if necessary. The GBP/NZD exchange rate has risen a little from the lows we saw on Friday and sits at NZD 2.0430 this morning. Where this pair will be at this time tomorrow morning, is a matter for debate.