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19/02/25
25
Australian Dollar Surges as RBNZ Cuts Rates: Implications for AUD/NZD Exchange
The Australian Dollar to New Zealand Dollar exchange rate has seen an upward trend, trading around 1.1170 during Asian market hours. This increase is attributed to the Reserve Bank of New Zealand’s (RBNZ) recent decision to decrease its Official Cash Rate by 50 basis points, lowering it from 4.25% to 3.75%. This policy change, following the February meeting, met market expectations and has prompted traders to analyze the implications for future monetary policy.
Market participants are particularly focused on the press conference by RBNZ Governor Adrian Orr, which is anticipated to provide insights into the central bank’s approach moving forward. Any dovish remarks during this address could further weaken the New Zealand Dollar and bolster the AUD/NZD exchange rate, potentially leading to increased buying interest in the Australian Dollar.
Conversely, the Australian Dollar itself has faced pressures following the Reserve Bank of Australia’s (RBA) policy alterations, which also occurred this week. The RBA announced a 25 basis point cut to its Official Cash Rate, reducing it from 4.35% to 4.10%. This marked the first reduction in four years, reflecting swells of economic pressures not seen in recent times.
After the RBA’s announcement, Governor Michele Bullock highlighted the substantial impact of elevated interest rates while cautioning against assumptions that inflation had been conclusively addressed. She pointed out the resilience in the job market but tempered expectations regarding further rate cuts, emphasizing uncertainty in the future monetary trajectory.
Meanwhile, Australia’s Wage Price Index indicated a quarterly increase of just 0.7% for Q4 2024, falling short of projections of 0.8%, and down from 0.9% in the previous quarter. Year-over-year, wage growth was recorded at 3.2%, a deceleration from the revised figure of 3.6% in the prior quarter, marking the slowest growth since the third quarter of 2022.
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