VT Markets APP

Trade CFDs on FX, Gold and more

Get

Australia, NZ Dollars decline as markets assess rate outlooks

May 21, 2024

Key points:

  • Australian dollar drifts 0.2% to $0.6654, with key support levels at $0.6650 and $0.6630.
  • New Zealand dollar eases to $0.6091, with support around $0.6083 and $0.6031.

The Australian and New Zealand dollars faltered on Tuesday as the momentum from last week’s rally dissipated. The market is closely watching the outlook for steady interest rates in both countries.

The Australian dollar slipped 0.2% to $0.6654, unable to reclaim its recent four-month high of $0.6714. Key support levels are found under $0.6650 and around $0.6630. The dip in the Aussie was moderated by robust prices for Australia’s major commodities, especially copper, where a squeeze on short positions drove prices to all-time highs.

Chart displaying AUD/USD exchange rate at 0.66565 with a trend of -0.10%, reflecting the Australian dollar's decline as markets assess rate outlooks. The chart features moving averages (MA) and MACD indicators, highlighting key support levels under $0.6650 and around $0.6630. Despite a slip of 0.2%, the decline is moderated by robust prices for Australia’s major commodities, especially copper. Image hosted by VT Markets, a forex CFDs brokerage.

Picture: Aussie dollar slumps as seen on VT Markets app.

The New Zealand dollar eased to $0.6091, retreating from last week’s one-month peak of $0.6139. It has support around $0.6083 and $0.6031.

Chart displaying NZD/USD exchange rate at 0.60970 with a trend of -0.09%, reflecting the New Zealand dollar's decline as markets assess rate outlooks. The chart features moving averages (MA) and MACD indicators, highlighting market anticipation of the Reserve Bank of New Zealand's (RBNZ) policy meeting. The RBNZ is expected to keep the official cash rate (OCR) at 5.5%, with no rate cuts projected until well into next year. Image hosted by VT Markets, a forex CFDs brokerage.

Picture: New Zealand dollar has eased. Download the VT Markets app now.

Rate hike may occur soon

On Tuesday, the Reserve Bank of Australia (RBA) released the minutes of its latest policy meeting, where it considered another rate hike but ultimately decided to hold steady. The RBA awaits further data on inflation and consumer spending before making any changes. 

Investors have ruled out the possibility of another rate hike, but they also see a slim chance for an early cut. The current market sentiment suggests a 50-50 chance of a rate cut in December.

You might be interested: Australian and New Zealand Dollars Retain Strength as Powell Calls for Rate Patience

OCR expected to remain unchanged

The Reserve Bank of New Zealand (RBNZ) is set to hold its policy meeting on Wednesday, with expectations to keep the official cash rate (OCR) at 5.5%. However, the RBNZ itself projects no rate cuts until well into next year, posing a risk that it might stick with that outlook in its updated forecasts. 

Overall, the cautious stance of both central banks suggests that while immediate rate changes are unlikely, the evolving economic data will be crucial in shaping future policy decisions. Traders should remain vigilant, monitoring commodity prices and inflation trends, as these factors will significantly influence currency movements and market sentiment.

Start trading now — click here to create your live VT Markets account.