New Zealand Dollar Rallies after RBNZ Hint at Future OCR Increase. The AUD/NZD Exchange Rate is currently trading at 1.0571 at 8:00 AM AEST Today.
The New Zealand Dollar rallied against the Australian Dollar Yesterday after the release of the New Zealand Reserve Bank (RBNZ) Official Cash Rate release. The Interest Rates have been kept on hold at 3.5%.
The rally came off the accompanying Policy Statement by Governor Graeme Wheeler, which was more Hawkish than investors were anticipating.
Key statements were that unemployment continues to decline, inflation is at modest rates and can be sustained. Governor Wheeler made mention of the decline in dairy pricing being a risk to growth outlook, however made mention that the expectation is for some recovery in Dairy pricing in 2015.
The key statement that caused the significant rally in the ‘kiwi’ (NZD) was in Governor Wheeler’s closing statement which indicated that the next change to the Cash rate will be to increase. Stating that ‘Some further increase in the OCR (Official Cash Rate) is expected to be required at a later stage. Further policy adjustments will depend on data emerging over the assessment period.’
Investors reacted to this information by buying into the New Zealand Dollar and we saw over a 1 percent loss in the Australian Dollar to New Zealand Dollar (AUD/NZD) Exchange Rate, reaching a low of 1.0631 after the release of this statement. The Exchange Rate has continued to drop by almost a further per cent during yesterday’s offshore trading session.
The Senior Foreign Exchange Strategist at ANZ, Sam Tuck, indicated that the market wasn’t anticipating such a statement. ‘The RBNZ has definitely moved towards a more neutral stance, but compared to where our global pairs are, with the market pricing a full cut by the RBA (Reserve Bank of Australia) in April next year, the reaffirmation of eventual tightening-bias does stand out in the global world of central banks and makes the New Zealand dollar prospects seem rather rosy compared to everywhere else.’
Australian Unemployment Rate at 6.3%
Yesterday provided the release of Australia’s Unemployment Rate and Employment Change figures.
The Unemployment figure came in as expected with a slight increase from last month moving from a rate of 6.2% to a rate of 6.3%. This was in line with expectations and did not cause investors much shock as this had already been very much built into the AUD Exchange Rate. The AUD did have an initial spike with the Employment Change figures, with a result of 42,700 new jobs, well above the expected 15,000 jobs that were forecasted.
The rally was relatively short lived with accompanying information supplied by the Australian Bureau of Statistics that full-time employment increased by only 1,800 jobs and monthly hours dropped by 4.4 million hours.
AUD/USD Exchange Rate continues to trend at a 4.5 year low.
During the offshore session the US released their monthly Retail Sales and Core Retail Sales. This data release provides an important indicator of consumer sentiment through consumer spending, calculated from the change the in total value of sales at retail level. The result was all positive for the US economy with an increase on the forecast and previous month’s figures. Retail sales provided a 0.7% increase on spending and Core Retail Sales a 0.5% increase. The US Also released their Unemployment Claims by the Department of Labour which showed a reduction in the number of individuals filing for unemployment assistance with a figure of 294,000 down from 297,000. This provided another positive sign for the US labour market and the US economy as a whole.
The AUD/USD Exchange Rate is currently trading in the high 82 US Cent Range today