The Reserve Bank of Australia has moved into a wait-and-see mode before deciding on whether it needs to hike interest rates further. At the latest central bank meeting, it kept rates unchanged at 4.10% indicating that the July monthly CPI indicator showed another drop that it is on target to reach the projected inflation target range by late 2025. There are some signs of growth slowing, uncertainties around the path of China’s economy, a financial squeeze on many domestic households, and the lag effects of existing interest rates gave the RBA sufficient reasons to hold rates once again. However, moving forward, it is still concerned about inflation, in particular the rising services and rent inflation, and has declared it will be data dependent for future decisions.

The Reserve Bank of New Zealand is the only central bank that considers it has done enough in hiking interest rates, so the peak has already been reached. If the RBA continues to be encouraged by incoming data then it too will follow suit and this could allow the Australian dollar to fall against the New Zealand dollar into the end of the year. The seasonals do favour the Aussie New Zealand dollar downside with an average fall of 1.95% between September 5 and December 18 over the last 23 years. So, will we see Aussie New Zealand dollar fall again this year? Obviously, this will depend on the incoming data for both the RBA and the RBNZ with so many uncertainties both domestically and internationally circulating right now.

Major Trade Risks: The major trade risk is if the RBA sees signs of growing inflation and needs to hike interest rates again which should lift the AUD against the NZD.

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