AUD/NZD surges to near 1.1000 following the unexpected rate cut by RBNZ

• The AUD/NZD lost ground following the RBNZ’s unexpected 25 basis point rate cut on Wednesday.
• The RBNZ Monetary Policy Statement indicates that inflation is decreasing and returning to the 1-3% target range.
• The Australian Dollar advances due to the decreasing likelihood of an RBA rate cut soon.

AUD/NZD breaks its three-day losing streak, trading around 1.0990 during the Asian session on Wednesday. This upward movement is attributed to the Reserve Bank of New Zealand’s (RBNZ) unexpected decision to cut its Official Cash Rate (OCR) by 25 basis points to 5.25% at its August meeting. Traders are looking forward to further insights from the press conference and RBNZ Governor Adrian Orr’s speech scheduled for later in the day.

According to the RBNZ Monetary Policy Statement (MPS) summary, inflation is decreasing and returning to the 1-3% target range. Service sector inflation is anticipated to drop further. The committee’s decision on additional easing will depend on their confidence that pricing behavior remains aligned with a low inflation environment. The Consumer Price Index (CPI) is expected to stay around the target midpoint in the foreseeable future.

On the Aussie front, recent data shows that Australian wage growth remained elevated in the second quarter, prompting the Reserve Bank of Australia (RBA) to adopt a hawkish stance regarding its policy outlook. This has been supporting the Australian Dollar (AUD) and underpinning the AUD/NZD cross.

Last week, RBA Governor Michele Bullock ruled out the possibility of rate cuts for the next six months. Bullock emphasized that the Australian central bank remains vigilant about inflation risks and is ready to raise rates again if needed.