Change in RBA’s Growth Outlook Prompts AUD/NZD to Tumble
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate fell back during Tuesday’s trading session as markets reacted to the Reserve Bank of Australia’s (RBA) latest policy meeting.
At the time of writing AUD/NZD is down around 0.3% from its opening levels on Tuesday, with the pairing down almost half a cent from its best levels.
Australian Dollar (AUD) Slumps as RBA Appears Bearish on Growth
The Australian Dollar came under pressure during Tuesday trading session, following the RBA’s March rate decision.
As expected the bank chose to leave interest rates on hold this month, with a statement that was largely identical to February’s.
However there was on key area in which the statement differed, with economists suggesting that a change in language it in growth outlook suggests that the bank is a little more pessimistic than previously.
Robert Rennie, head of financial market strategy at Westpac said;
‘We would expect to see some softening in the Aussie as markets digest what appears to be a tweak in the RBA’s GDP growth forecast over the next couple of years from ‘to average a bit above 3 per cent’ to ‘faster in 2018 than it did in 2017.’
This suggests that it very unlikely that the RBA will be in any rush to begin raising interest rates this year.
New Zealand Dollar (NZD) Gains Trimmed by Decline in Dairy Prices
At the same the New Zealand Dollar found its advance slowed in overnight trade on Tuesday following the latest global dairy auction.
The latest auction saw dairy prices slump by 0.6%, its second consecutive decline after falling 0.5% in the previous auction and further unwinding some of the gains made at the start of the year.
With dairy products accounting for over 20% of New Zealand’s exports, the fortnightly auction can often have a major impact on the ‘Kiwi’.
AUD/NZD Forecast: Subdued GDP to Weigh on ‘Aussie’?
Looking ahead the AUD/NZD exchange rate may continue to slide during Wednesday’s session with the release of Australia’s latest GDP report.
While growth is no expected to have slowed in the fourth quarter, economists predict that with growth holding steady at 0.6% there will be little for economists to celebrate either.
Meanwhile the New Zealand Dollar may be bolstered on Thursday as domestic manufacturing sales are forecast to have risen sharply at the end of 2017.