AUD Inflation, RBNZ News and Analysis

• Australian inflation appears sticky, RBNZ signals potential peak in rates
• Aussie ( AUD/USD ) pullback gains momentum ahead of crucial US data
• Kiwi dollar ( NZD / USD ) erases hard fought gains on dovish repricing

Australian Inflation Holds Firm, RBNZ Signals Possible Peak in Rates

Wednesday morning provided a fair amount of data for the antipodeans with Australia’s monthly inflation indicator holding steady at 3.4% while the Reserve Bank of New Zealand (RBNZ) issued a dovish hold on the official cash rate.

The Australian monthly CPI indicator revealed no change to the 3.4% level reached over December, despite expectations of a slight lift. Thus, the Aussie dollar softened in the early hours of Wednesday morning but declines in the Aussie dollar were overshadowed by the move lower in Kiwi dollar after the RBNZ acknowledged the disinflation process taking place and issued concern over the country’s level of productivity.

Aussie Pullback Gains Momentum Ahead of Crucial US Data

AUD /USD continued the shorter-term bearish move after the monthly CPI indicator came in lower than expected but maintained the 3.4% level witnessed in December. The RBA’s experience with inflation has been a volatile one, twice having to resort to hikes after pausing interest rates. But markets appear satisfied that inflation is on the way down and the Aussi dollar reflects as much.

The pair trades around 50 pips lower on the day in the early European/London session after revealing signs of bullish fatigue towards the end of last week. Prices have rejected a close above the April 2020 level of 0.6580, which has come into play on numerous occasions, and now appears headed for 0.6460.

Key US inflation data tomorrow and today’s the second estimate for US Q4 GDP at 13:30 (GMT) may influence the pair should we see a material deviation from the advance print. Key Fed speakers are also due to make public appearances today.

Source: TradingView, prepared by Richard Snow

Kiwi Dollar Erases Hard Fought Gains on Dovish Repricing

NZD/USD, like the AUD/USD, has turned sharply lower to accelerate the recent signs of bullish fatigue present around 0.6200. The pair failed to close above the early December swing high of 0.6223 where successive daily candles revealed higher upper wicks – suggesting a waning of the bullish move.

NZD/USD was bid higher as the market anticipated the potential for another rate hike this month which appears to have all but disappeared. The subsequent dovish repricing of the Kiwi dollar has resulted in an acceleration of prices to the downside with immediate support coming in at the 200-day simple moving average (SMA), followed by 0.6050 – a key pivot point for the pair towards the end of last year. The MACD suggests momentum is shifting to the downside while the RSI still has some room to run before entering oversold territory.

Source: TradingView, prepared by Richard Snow