In the early hours of Tuesday morning, the RBA will meet to decide on its interest rate level. Short-term interest rate markets are pricing in a 39% chance that the RBA will hike rates again by 25bps. However, the consensus view is for rates to remain unchanged.

The recent drop in the monthly CPI reading to 5.6% was below the minimum forecast of 5.8% and that supports the notion that the RBA can be more cautious in raising rates. If the RBA signals that it has probably reached a ‘peak terminal’ rate then watch out for a potential AUD selling against the NZD.

One interesting seasonal pattern to note is that the AUDNZD pair tends to fall over the first few days of July. Over the last 23 years, the AUDNZD pair has fallen over 65% of the time in the first few days in July.

Could the RBA send the AUD lower against the NZD if it signals that it has done hiking rates now?

Major Trade Risks: The main risk here would be if the RBA delivers another hawkish surprise like it did at its last meeting.

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