Bias: The AUD/NZD pair is currently range-bound, as it is near the 90-day average and situated in the middle of the 3-month range.
Key drivers:
- Rate gap: The Reserve Bank of Australia is considering potential interest rate hikes, which could strengthen the AUD compared to the New Zealand dollar as the Reserve Bank of New Zealand continues its easing policy.
- Risk/commodities: Recent soft Chinese inflation data has raised concerns about demand for Australian exports, particularly impacting the AUD adversely.
- One macro factor: Ongoing global trade tensions, especially U.S. tariffs on New Zealand exports, are weighing on the NZD and could lead to increased volatility.
Range: The AUD/NZD pair is likely to hold within its recent 3-month range, with no strong catalysts pushing it significantly higher or lower at this time.
What could change it:
- Upside risk: A stronger-than-expected recovery in China's economy could boost demand for Australian goods, aiding the AUD.
- Downside risk: Continued risk-off market behavior or additional signs of economic weakness in New Zealand could put downward pressure on the NZD, impacting the pair's performance.