11/08/26

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AUD/NZD retreated after the Australian Dollar weakened in the wake of the Reserve Bank of Australia’s latest policy decision. The cross traded near 1.1960 during Asian hours on Tuesday, trimming earlier gains as markets responded to a cautious RBA stance.

As expected after second-quarter inflation came in below forecasts, the RBA left the Official Cash Rate unchanged at 4.35% for a second straight meeting. The decision reinforced the view that policymakers remain in wait-and-see mode, with investors now focused on whether the central bank will maintain its restrictive bias for longer or begin to signal greater concern about growth.

Attention is shifting to the RBA’s August Statement on Monetary Policy, which should provide a fuller assessment of inflation, domestic demand, and the outlook for activity. That update is likely to be important for expectations around the duration of elevated interest rates and for the Australian Dollar’s relative appeal in carry trade strategies through the rest of the year.

Conditions in New Zealand are also adding uncertainty to the pair. Oil prices have risen on concern over the potential reopening of the Strait of Hormuz, raising questions about the Reserve Bank of New Zealand’s policy path ahead of its September meeting. Traders are also awaiting New Zealand’s third-quarter inflation expectations data after the second quarter delivered an unexpected pickup in price pressures.

Political developments in Wellington are contributing to the cautious tone. Prime Minister Christopher Luxon has called an urgent caucus meeting for Wednesday in response to growing speculation about his leadership. The move follows a volatile week in which reports of internal pressure on the National Party intensified, adding another layer of uncertainty to the regional backdrop.

For now, AUD/NZD remains sensitive to relative central bank guidance. A more hawkish tone from the RBA would tend to support the Australian Dollar, while a softer stance or further signs of slowing inflation could keep the currency under pressure against its New Zealand counterpart.