Usually, the best pair to trade interest rate differentials between the RBA and the RBNZ is the AUDNZD currency pair. On Tuesday of this week, the RBA met and there was a shift in their policy meeting which showed a ‘hawkish hold’. As a very brief summary, the RBA decided to drop the word ‘patient’ from their statement language in recognition of the rise in inflation the central bank has seen. Furthermore, the RBA sees inflationary pressures set to rise over the near term and that dies to increase the chances of an RBA interest rate hike this year. As a result of this shift, you would typically expect some gains in the AUDNZD currency pair.

Between now and April 28 the AUDNZD pair has gained a total of 10 times over the last 15 years. The largest gain was an impressive 4.45% rise in 2020. With the RBA’s hawkish hold will the AUDNZD pair gain again this year?

Major Trade Risks:

• If there is a significant slow down in China/lockdowns on further Covid outbreaks that will weigh on the outlook for Australia.
• Watch out for unexpected commentary from RBA central bankers.