The AUD/NZD exchange rate dropped to around 1.1440 as the Reserve Bank of Australia (RBA) maintained its Official Cash Rate at 3.6%. This decision aligns with expectations due to increased inflation in Australia during the third quarter. The New Zealand Dollar strengthened as the Reserve Bank of New Zealand paused its monetary-easing, having recently reduced rates by 25 basis points to 2.25%.
The Australian Dollar is weaker against major currencies, especially the Swiss Franc. Price pressures in Australia rose by 3.2% annually in the third quarter, prompting speculation that the RBA might increase rates by mid-2026 if inflation persists. The RBA’s future decisions may hinge on upcoming November labour market data, anticipated to show 20,000 new jobs—a decline from October’s 42,200. The Unemployment Rate may edge up to 4.4% from 4.3%.
RBA Monetary Policy Tools
The RBA manages monetary policy and maintains price stability, primarily through interest rate adjustments, which impact the Australian Dollar’s strength. Higher inflation typically leads to interest rate hikes, attracting capital inflows and supporting the AUD. Quantitative Easing (QE) and Quantitative Tightening (QT) are additional RBA tools influencing the economy and the AUD.
With the Reserve Bank of Australia holding its cash rate at 3.6%, we see the Australian dollar weakening, especially against the New Zealand dollar which has slid to near 1.1440. This pause by the RBA comes even as we saw Q3 inflation figures from earlier in 2025 hit a persistent 3.2%. The market is now pricing in a divergence between the RBA and other central banks.
The policy difference with New Zealand is particularly stark, justifying the NZD’s recent strength. We note that the Reserve Bank of New Zealand is holding its own cash rate at a much more restrictive 5.5%, a level they’ve maintained since July of 2025. This is because New Zealand’s own quarterly inflation from September was higher at 4.1%, forcing the RBNZ to maintain its hawkish stance.
Australian Labor Market and Its Impact
Our attention now turns to the Australian labor market data for November, due this Thursday. Expectations are for a cooling in the job market, with only 20,000 jobs created and the unemployment rate ticking up to 4.4%. A weak report here would confirm the RBA’s decision to remain on hold and likely push the AUD/NZD pair lower.
For derivative traders, this creates a clear opportunity to position for further AUD weakness against the NZD in the coming weeks. We believe buying AUD/NZD put options with January 2026 expiries offers a defined-risk way to capitalize on this monetary policy divergence. This strategy would benefit directly if this week’s jobs data comes in weaker than anticipated.
Looking back at the rate cycle of 2023, we saw how policy divergence can create sustained trends in currency pairs. The current setup could push AUD/NZD towards support levels around 1.1250, a level not seen since the second quarter of this year. We are treating the 1.1500 level as significant resistance for now.
