During the early European session on Tuesday, the AUD/NZD cross faced selling pressure near 1.0990, following the Reserve Bank of Australia‘s (RBA) decision to maintain the interest rate at 4.35% during its May meeting. However, the RBA’s tone appeared less hawkish compared to its March statement, prompting investors to await potential catalysts from the upcoming RBA Press Conference.
As anticipated, the RBA opted to keep the Official Cash Rate (OCR) steady at 4.35%, marking the fourth consecutive meeting without changes. The accompanying statement acknowledged easing inflation in Australia but highlighted persistent high levels. The board expressed caution, indicating that sustained movement of inflation within the target range might take time. Moreover, amidst economic uncertainties, the RBA refrained from committing to specific future actions, maintaining a flexible stance.
The Australian Dollar (AUD) encountered selling pressure post-meeting, as the RBA’s commentary fell short of market expectations for a more hawkish bias.
Conversely, the Reserve Bank of New Zealand (RBNZ) retained its cash rate at 5.5% for the sixth consecutive meeting, reinforcing the necessity of restrictive monetary policy to alleviate capacity pressures and curb inflation. The RBNZ signaled a postponement of any potential shift towards monetary easing until 2025, citing persistent inflationary pressures in the first quarter. This stance could provide support to the New Zealand Dollar (NZD) and act as a limiting factor on the upside potential of the AUD/NZD cross.
As markets await further developments, including insights from the RBA Press Conference, the AUD/NZD pair remains subject to potential shifts in sentiment and policy outlooks from both central banks.
