**Australia, New Zealand Dollars Firm as Markets Weigh RBNZ Risks and Global Economic Outlook**
*Adapted and expanded from an article by Wayne Cole, Reuters*
The Australian and New Zealand dollars inched higher in recent trading, supported by evolving market views on their respective central banks while global investors digest a mix of local data, global risk appetite, and shifting monetary policy expectations. Investors are focusing on a slew of factors affecting the two currencies, such as changing interest rate trajectories, economic growth signals from China—the region’s crucial trading partner—and the policy outlook from the Reserve Bank of New Zealand (RBNZ). This extended analysis explores the currents shaping currency trends and outlines implications for traders and investors.
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### **1. Recent Performance of the Antipodean Currencies**
– **Australian Dollar (AUD):**
– The Australian dollar recently firmed to US$0.6670, extending a prize recovery from lows near US$0.6570 observed earlier this month.
– Support is seen at US$0.6610, while resistance looms around US$0.6714. Sustained gains above these levels could pave a path toward a higher trading range.
– **New Zealand Dollar (NZD):**
– The New Zealand dollar climbed to US$0.6125, maintaining a positive trajectory after dipping to US$0.6080.
– Critical support is located at US$0.6100, and technical momentum suggests potential to challenge the US$0.6175 resistance band.
– **Context:**
– The recovery in both currencies comes as the US dollar moderates from recent highs amid recalibrated expectations around Federal Reserve policy tightening cycles. A softer dollar provides breathing room for risk-sensitive currencies.
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### **2. Reserve Bank of New Zealand: Policy Risks in Focus**
– **Current Policy Stance:**
– The RBNZ recently kept its Official Cash Rate (OCR) unchanged at 5.5 percent, diverging from central banks that have started signalling possible rate cuts as global inflation trends soften.
– According to the central bank’s May policy statement, while inflation is falling, it remains above the RBNZ’s 1-3 percent target range. The RBNZ continues to signal a vigilant stance, prepared to tighten policy if needed to anchor inflation expectations.
– **Market Reactions & Forward Guidance:**
– Analysts believe there is a risk the RBNZ could surprise markets with an interest rate hike if upcoming data shows persistent domestic inflation or wage growth.
– Market-implied probabilities suggest lingering uncertainty around RBNZ policy. The central bank’s “hawkish hold” position keeps traders sensitive to data releases in the coming weeks, especially on inflation and employment.
– Commentary from RBNZ officials has reinforced the message that while rate cuts are conceivable later in the year, the next move could still be higher if inflation proves sticky.
– **Expectations for Next
Read more on AUD/USD trading.