- AUD/NZD drifts higher on central bank divergence.
- The market will be focussed on the Yuan and the Jackson Hole for the week ahead.
AUD/NZD is creeping higher, extending the Reserve Bank of Australia (RBA) vs Reserve Bank of New Zealand (NZD) trade ahead of tomorrow’s RBA minutes. With respect to the RBA, a mixed data picture emerged last week with employment growth coming in solid while private-sector wage growth disappointed and the NAB Business Conditions Employment index fell. However, the RBA is not expected to cut at its next meeting while it waits to see the effect of 50bp already delivered – the Minutes may not be so much of an event and instead, markets will focus on trade, China and the Yuan for direction in the Aussie.
Eyes on the Jackson Hole
For the week ahead, investor focus moves to the Fed policy symposium in Jackson Hole. “We see risks the Fed Chair could disappoint markets looking for a green light on an extended easing campaign. Rates may take the brunt of the hit, but we doubt the USD will be able to shrug off any repricing in policy expectations – even if these ultimately prove short-lived,” analysts at TD Securities explained.
“With the USD turning in a mixed performance overall, we think the growing policy divergences seen in certain crosses look likely to gain traction in the days ahead. Here, we look for upside potential in and AUDNZD.”