The RBA made no changes to interest rates but said that further hikes cannot be ruled out.
Can this mean more gains for AUD/NZD?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/USD pulling back ahead of the RBA decision. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. ISM services PMI improved from 50.6 to 53.4 vs. 52.0 forecast, as supplier deliveries and prices components ticked higher
Japanese average cash earnings accelerated from 0.7% y/y to 1.0% in December, short of the estimated 1.3% increase
Japanese household spending down by 2.5% y/y in December vs. projected 2.0% decline and earlier 2.9% slump
U.K. BRC retail sales monitor slowed from 1.9% to 1.4% y/y vs. projected 1.2% gain to reflect subdued pace of consumer spending
RBA kept interest rates on hold at 4.35% as expected and noted that further hikes cannot be ruled out
RBA head Bullock says they have “a little way to go” in order to get inflation down
Chinese President Xi Jinping to meet with regulators to discuss measures to shore up equity market
Price Action News
Overlay of AUD vs. Major Currencies Chart by TradingView
Aussie volatility kicked into high gear early in the Asian trading session, thanks to the RBA monetary policy statement and headlines suggesting more stimulus efforts from China.
As expected, the RBA kept interest rates on hold at 4.35% but what drew bulls out was their remarks about keeping the door open for future hikes. However, policymakers also downgraded growth and inflation forecasts for this year and the next, suggesting that they’re less hawkish this time.
Perhaps the main reason for the Aussie’s climb are rumors that Chinese President Xi Jinping will push regulators to implement measures to keep the stock market supported. There has been word that authorities might convince firms to buy back more shares and that the sovereign wealth fund plans to increase ETF holdings.
Upcoming Potential Catalysts on the Economic Calendar:
U.K. construction PMI at 9:30 am GMT
Eurozone retail sales at 10:00 am GMT
Canadian Ivey PMI at 3:00 pm GMT
FOMC member Mester’s speech at 5:00 pm GMT
BOC Governor Macklem’s speech at 5:45 pm GMT
New Zealand quarterly employment change at 9:45 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
AUD/NZD: 15-min
AUD/NZD 15-min Forex Chart by TradingView
Thanks to a combo of a somewhat hawkish RBA announcement and expectations of stimulus from China, the Australian dollar popped higher across the board earlier.
While the RBA kept interest rates on hold and downgraded economic forecasts, policymakers also clarified that further rate hikes cannot be ruled out.Meanwhile, Chinese President Xi Jinping’s upcoming meeting with regulators sparked rumors that the ruling party might press for more efforts to shore up their tumbling stock market.
Any positive developments on this front could allow AUD to extend its gains, particularly against the Kiwi which is expecting to see a jump in unemployment for Q4 2023.
In particular, New Zealand’s upcoming quarterly jobs release might show an increase from 3.9% to 4.3% in the jobless rate, as record migration inflows likely translated to a some slack in the labor force during the period.
In that case, AUD/NZD could get another boost past its double bottom neckline around 1.0740 and go for a move to the upside targets at R1 (1.0760) then R2 (1.0770).
On the other hand, a significantly strong employment change reading might convince Kiwi bulls to charge, taking AUD/NZD back down to the lows near the 1.0700 major psychological mark.
