AUD/NZD gains support over 1.0800 as attention switches to RBA Lowe's speech and RBNZ policies

In the early Tokyo session, the AUD/NZD pair is exhibiting inventory building in a range of 1.0810-1.0830. Investors have moved their emphasis to the speech of Reserve Bank of Australia (RBA) Governor Philip Lowe, causing the asset to fluctuate erratically. Wednesday's interest rate announcement by the Reserve Bank of New Zealand (RBNZ) will be the key catalyst for the cross.

Investors are anticipating the RBA policymaker's speech in order to make an educated judgment. The speech will provide recommendations on interest rates to offset the unprecedented rise in inflationary pressures. Inflation reached 7.3% in the third quarter, forcing the Australian central bank to increase its price growth forecast to 8%. Nonetheless, the RBA maintained its rate hike schedule at 25 basis points (bps) to maintain robust economic prospects and to achieve price stability.

On the kiwi front, the Reserve Bank of New Zealand's (RBNZ) monetary policy pronouncement will increase RBNZ-RBA policy divergence. Governor Adrian Orr of the Reserve Bank of New Zealand (RBNZ) has already announced five straight rate hikes of 50 basis points (bps) to 3.5% and has no plans to suspend rate hikes despite growing inflationary pressures.

According to a Reuters survey on the RBNZ's rate hike forecasts, the Official Cash Rate (OCR) will increase by 75 basis points (bps) this time. A similar event would cause the OCR to rise to 4.25 percent and significantly diverge from the RBA's policy structure.

The decision could strengthen the New Zealand Dollar in the future, but will leave the Reserve Bank of New Zealand with less space for future rate hikes. Additionally, this will shift more economic dynamics obligations to the future.