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AUD/NZD falls to a new seven-month low below 1.0800 following the RBNZ's 75 basis point rate hike
AUD/NZD accepts offers to re-establish a multi-day low in response to the RBNZ's hawkish action. RBNZ meets market expectations by announcing a 0.75 percent OCR increase. Despite unfavorable Australian statistics, cautious optimism favors upward progress. The speech of RBNZ Governor Adrian Orr will emphasize the need of risk catalysts for new impetus.
After the Reserve Bank of New Zealand (RBNZ) issues its latest Interest Rate Decisions on Wednesday, the AUD/NZD currency pair slips to its lowest levels since early April. Despite this, the price fell to 1.0763 during the early reaction before recovering to 1.0780 by press time.
The latest movement of the cross-currency pair may also be related to the market's risk-on mentality, as well as the negative readings of Australia's preliminary S&P Global PMIs for November, which appear to have challenged pair buyers recently.
RBNZ matched market expectations by announcing a rate hike of 75 basis points (bps) in conjunction with the tenth interest rate increase. It should be noted, however, that pessimistic economic forecasts predicting a recession in 2023 and negative comments from New Zealand Finance Minister Grant Robertson, indicating that a recession is imminent, appear to have challenged the AUD/NZD bears in recent weeks.
Earlier in the day, Australia's S&P Global Manufacturing PMI decreased to 51.5 from 52.7 and 52.4, respectively, while the Services PMI decreased to 47.2 from 49.3 and 49.4 respectively.
The AUD/NZD bears appear to be favored by ominous concerns from China and contradictory remarks from Reserve Bank of Australia (RBA) Governor Philip Lowe, who rejected any predetermined route.
Stocks in Europe, the United Kingdom, and Wall Street all closed higher, reflecting the sentiment, while 10-year US Treasury yields fell six basis points (bps) to 3.76%. However, benchmark bond rates remain largely steady near 3.75 percent, while S&P 500 Futures struggle to find obvious direction near 4,011.
Traders will keenly monitor a press conference by RBNZ Governor Adrian Orr for immediate direction as they seek additional evidence supporting the recent hawkish stance by New Zealand's central bank. Nevertheless, the quarterly economic outlook and the OCR peak will be constantly monitored.
The AUD/NZD pair's sustained trading below the 50% Fibonacci retracement level of September 2021 to 2022 upside, near 1.0885 as of press time, gives sellers hope of testing the 61.8% Fibonacci retracement level near 1.0740, also known as the Golden Ratio.
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