AUD/NZD darts lower after RBA minutes, RBNZ decision next

on Feb 21, 2023
  • The AUD/NZD pulled back after the RBA minutes.
  • The RBA hinted that it will continue hiking interest rates in 2023.
  • The RBNZ is expected to continue hiking rates on Wednesday.

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The AUD/NZD exchange rate retreated slightly after the Reserve Bank of Australia (RBA) published minutes of its February meeting. It declined to a low of 1.1035, which was a few points below this month’s high of 1.1088. Focus now shifts to the upcoming Reserve Bank of New Zealand (RBNZ) scheduled for Wednesday.

RBA minutes, RBNZ meeting next

The RBA held its first monetary policy meeting of the year earlier this month. In it, the committee decided to continue hiking interest rates by 0.25% for the fourth time. It brought the main interest rate to 3.35% and signaled that it will deliver more hikes going forward.

The minutes published on Tuesday provided more color about the meeting. In it, the members noted that wage growth was starting to pick up as the wage price index was expected to rise to 4.25% later this year. This growth will be caused by the ongoing tight labor market.

The RBA also expects that consumer prices will remain high for a while. It expects that the headline consumer price index (CPI) will average about 4.75% by the end of the year. Inflation now stands at about 7.8%. As a result, the committee noted that further rate hikes were necessary to speed the slowdown. The statement added:

“Consistent with this, members agreed that further increases in interest rates are likely to be needed over the months ahead to ensure that inflation returns to target and that the current period of high inflation is only temporary.”

The next main catalyst for the AUD/NZD exchange rate will be the upcoming RBNZ meeting, which I wrote about here. In its first meeting of the year, the bank is expected to deliver another 0.50% interest rate hike. It will also hint that it will continue raising interest rates in the coming meetings.

AUD/NZD forecast

AUD/NZD chart by TradingView

I wrote about the AUD to NZD last week and pointed that it could have a bearish breakout. At the time, I pointed to the rising wedge pattern that has been forming. This pattern has continued and is slowly nearing its confluence level. It has moved slightly below the lower side of the upper line of the wedge. It has also formed a shooting star pattern.

The pair’s upside is being supported by the 25-day and 50-day moving averages. Therefore, the pair will likely continue falling ahead of the RBNZ interest rate decision. If my prediction is correct, the next support level to watch will be at 1.100.