AUD Rallies vs NZD as RBA Delivers 25 bps Rate Increase

Key Moments

Australian Dollar Firms After RBA Decision

The AUD/NZD cross finds renewed buying interest on Tuesday after the Reserve Bank of Australia announces its latest policy decision, drawing demand on intraday dips. The pair reverses a modest decline from the Asian session that had taken it toward the 1.2360 region and subsequently climbs to a three-day high. Despite the initial reaction, follow-through momentum is limited, with the cross trading only marginally above the 1.2400 level, representing a gain of about 0.15% for the session.

In line with broad expectations, the Australian central bank lifts the Official Cash Rate (OCR) by 25 basis points to 4.60% at the conclusion of its September monetary policy meeting. This moves the policy rate to its highest level since 2011. The accompanying statement highlights that upside risks to inflation are materializing and emphasizes that the bank remains focused on preventing elevated inflation from becoming entrenched. This stance keeps the possibility of further policy tightening on the table, lending support to the Australian Dollar and, by extension, to the AUD/NZD pair.

Market Awaits Guidance From RBA Governor

Despite the supportive rate move and policy language, traders appear cautious about initiating larger long positions in AUD/NZD. Market participants are looking ahead to additional signals on the Reserve Bank of Australia’s future course, and attention is centered on RBA Governor Michele Bullock’s remarks at the post-meeting press conference. The commentary delivered there is expected to be a key driver for the Australian Dollar and could provide more decisive direction for the cross.

At the same time, expectations that the Reserve Bank of New Zealand will increase its Official Cash Rate on October 28 are offering a counterbalance, underpinning the New Zealand Dollar. These RBNZ rate hike bets are helping to cap the upside in AUD/NZD, even after the RBA’s policy action.

Event Focus: RBA Press Conference

Following the Reserve Bank of Australia’s monetary policy decision, the Governor conducts a press conference to explain the rationale behind the move. The event typically lasts around one hour, beginning with prepared remarks before opening the floor to questions from journalists. According to the description of the indicator,
“hawkish comments tend to boost the Australian Dollar (AUD), while on the opposite, a dovish message tends to weaken it.”