Ella 
The New Zealand dollar (NZD) appreciated on Wednesday and the Australian dollar (AUD) recovered ground, reversing recent losses, after the Reserve Bank of New Zealand (RBNZ) announced its decision to keep the official cash rate (OCR) at 5.5%. Both currencies are closely related due to Australia and New Zealand’s geographical proximity and the close trade relationship between the two countries.
Investors continue to assess the outlook for the Reserve Bank of Australia’s (RBA) monetary policy. On Tuesday, minutes of the RBA meeting showed that the board considered raising interest rates in May but ultimately decided to maintain a stable policy. Policymakers noted that it was difficult to definitively rule out future changes to the cash rate.
Australia’s inflation rate in the first quarter was 3.6%, down from 4.1% in the previous quarter but higher than market expectations of 3.4%. This points to increased inflation risks, as highlighted in the minutes of the RBA’s May policy meeting. The situation has prompted the Reserve Bank of Australia to revisit the issue of a possible interest rate hike.
On the dollar side, traders are awaiting the release of minutes from the May 1 Federal Open Market Committee (FOMC) meeting, which will take place on Wednesday. They are looking for clues about the Federal Reserve’s policy stance. The central bank remains cautious on inflation and the possibility of an interest rate cut in 2024.
