AUD/NZD jumps above 1.1050 as RBNZ leaves its cash rate on hold at 5.5%

• AUD/NZD gains momentum around 1.1075 in Wednesday’s Asian session, up 0.63% on the day. 
• The RBNZ  maintained the Official Cash Rate (OCR) unchanged at 5.50% at its July meeting on Wednesday, as widely expected. 
• The RBA’s hawkish stance lifts the Aussie against the Kiwi. 

The AUD/NZD cross attracts some buyers near 1.1075 during the Asian trading hours on Wednesday. The cross gains momentum after the Reserve Bank of New Zealand (RBNZ) kept its cash rate unchanged in its July monetary policy meeting. 

The New Zealand Dollar (NZD) edges lower as the RBNZ decided to keep the Official Cash Rate (OCR) steady at 5.50%, as widely expected by the markets. This marked the eighth consecutive meeting with no change in rates. According to the Minutes of the RBNZ interest rate meeting, the board notes a risk that domestically driven inflation could be more persistent in the near term. The central bank expected headline inflation to return to within the 1 to 3 % target range in the second half of this year. Meanwhile, New Zealand swaps imply 25 basis points (bps) of RBNZ rate cuts for October versus 16 bps before the RBNZ statement. 

Elsewhere, the weaker Chinese economic data exerts some selling pressure on the China-proxy Kiwi. China’s Consumer Price Index (CPI) increased 0.2% YoY in June, compared to a rise of 0.3% in May, below the consensus of 0.4%. On a monthly basis, the CPI inflation arrived at -0.2% MoM in June versus the previous reading of a 0.1% decline, worse than the -0.1% expected.

On the Aussie front, the hawkish stance of the Reserve Bank of Australia (RBA) provides some support to the Australian Dollar (AUD). The recent hotter inflation data spurred the expectation that the RBA would raise a 25 bps rate in the September 24 meeting.