The AUDNZD pair remained under pressure following this morning’s RBNZ policy decision.
There were no major surprises from the bank, but maintaining a “higher and longer” position provided a boost to the NZD.
AUDNZD (April 10, 2024)
I also believe the reaction is partly due to prolonged price action on the pair, which has climbed by several significant numbers in recent weeks.
However, internal market parameters already indicated some downward risks.
Below we have the actual yield differential for the pair, showing the downside risks.
Real Yield Differential AUDNZD
Furthermore, growth differentials (according to CESI data) also suggest that the exchange rate has become a bit tight.
AUDNZD_CESI_2024_04_09
The AUDNZD pair is also likely to experience mean reversion when the price moves too far from the 1.08 level.
I don’t think today’s decision by the RBNZ changed the situation much in the medium term, but simply gave some room for internal market participants to see a long-awaited reversion to the mean.
If you want more details on the decision, check out Eamonn’s always helpful posts below:
cnbctv18-forexlive
