AUDNZD hit the 4 month lows at ~1.07015

Neither the Reserve Bank of Australia (RBA) nor the Reserve Bank of New Zealand (RBNZ) are expected to hike their respective interest rates this week.

Yet, markets are forecasting the most one-week volatility for AUDNZD since mid-August, when the RBA and RBNZ were last in action.

Bloomberg’s FX model forecasts a 76% chance that AUDNZD will trade within a 200-pip range this week, between 1.0658 and 1.0859.

Markets are set to boost the currency of the central bank that can out-hawk the other, even as AUDNZD has been squeezed into an even-tighter range so far in 2023.

Events Watchlist

• Monday, October 2nd: Australia September inflation

Should this figure move back closer to January’s peak of 6.4%, that may worsen already-elevated inflation expectations for Australia. AUDNZD may push higher if markets are prompted to speculate that the RBA’s fight against inflation is not yet over, even though the RBA has already hiked by 400 basis points since April 2022.

• Tuesday, October 3rd: Reserve Bank of Australia rate decision

Even though the RBA is widely expected to maintain its cash rate at 4.1% this week, under the helm of new governor Michele Bullock, markets are still fully pricing in one more hike by Q1 2024. Hints that the new governor could be backing away from that further rate hike, amid mixed economic data, may drag AUDNZD lower.

• Wednesday, October 4th: Reserve Bank of New Zealand rate decision

Like its counterparts across the Tasman Sea, the RBNZ is also most likely to keep its benchmark rate unchanged this week. The RBNZ has to juggle between slowing confidence and retail sales, with the risk of resurgent inflation due to higher oil prices. Yet, markets are still betting on one more RBNZ hike by February 2024. And if those bets have to be pared, that should weaken the Kiwi dollar while boosting AUDNZD.

Here’s comprehensive list of other key economic data and events due this week:

Monday, October 2

• JPY: Bank of Japan meeting minutes
• AUD: Australia September inflation
• GBP: Speech by BOE’s Catherine Mann
• USD: US September ISM manufacturing
• USD: Speeches by Fed Chair Jerome Powell, Philadelphia Fed President Patrick Harker, Cleveland Fed President Loretta Mester, New York Fed President John Williams

Tuesday, October 3

• AUD: RBA rate decision
• USD: Speech by Atlanta Fed President Raphael Bostic

Wednesday, October 4

• NZD: RBNZ rate decision
• EUR: Eurozone August retail sales, producer prices; speech by ECB President Christine Lagarde
• USD: Speeches by Chicago Fed President Austan Goolsbee, Fed Governor Michelle Bowman

Thursday, October 5

• AUD: Australia August external trade
• EUR: Germany August trade balance
• USD: US weekly initial jobless claims
• USD: Speeches by San Francisco Fed President Mary Daly, Cleveland Fed President Loretta Mester

Friday, October 6

• EUR: Germany August factory orders
• CAD: Canada September jobs report
• USD: US September nonfarm payrolls (possibly delayed due to US govt shutdown)