The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate recorded hefty gains on Thursday after data for both New Zealand and China emerged.
As China is both Australia and New Zealand’s largest trading partner, the ‘Aussie’ and ‘Kiwi’ exchange rates can be extremely sensitive to any developments in the nation.
Thursday brought disappointment for the Oceanic currencies when China’s HSBC Manufacturing Purchasing Managers Index (PMI) slipped from 49.6 to 49.2 in April—the lowest number in the past 12 months. Any figure residing below the 50.0 benchmark indicates contraction in the sector, while above denotes growth.
Industry expert Zhao Yang commented: ‘The growth momentum remains weak in April, which calls for further policy easing. The next step might be a cut in interest rates and I expect they will do that this quarter.’
The People’s Bank of China (PBOC) recently made a cut to its reserve requirement ratio (RRR) in a bid to boost economic growth in the nation after already loosening monetary policy on several occasions this year.
Economist Dariusz Kowalczyk commented: ‘The soft number implies continued underlying weakness in the manufacturing sector despite simulative policies rolled out since last November. Markets will not expect more easing, including on the monetary front.’
However, unlike the ‘Kiwi’, the decline in Chinese manufacturing data failed to pressure the ‘Aussie’ exchange rate significantly lower as investors priced out the possibility of a rate cut by the Reserve Bank of Australia (RBA) at next month’s policy meeting. The Australian economy recorded inflation growth on Wednesday which led many economists to believe the nation could escape a borrowing cost haircut for another month.
Meanwhile, the New Zealand Dollar’s bad day continued when New Zealand Credit Card Spending slipped from 5.8% to 5.2% on the year in March.
Additionally, the New Zealand Dollar was pressured lower by Reserve Bank of new Zealand (RBNZ) comments that suggested a downward adjustment to the official cash rate may need to be made in order to combat subdued inflation.
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate could be in for an interesting day on Friday with RBA official Guy Debelle speaking about the foreign exchange market.
Any mention of the recent spikes in ‘Aussie’ trading just before interest rate decisions were announced or minutes were released could impact the AUD/NZD currency pair.
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate is trading at 1.0216. The New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate was trending in the region of 0.9794.
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