Australia, NZ dollars brace for volatility as rate risk looms
TLT•The Australian and New Zealand dollars were little changed as investors awaited inflation data and central bank decisions that could shape interest rates. Markets priced a 60% chance of another New Zealand rate hike in December and a 66% chance of an Australian hike on November 3.
1. New Zealand rate outlook
The New Zealand dollar edged up to $0.5690 after losing 0.3% overnight. The Reserve Bank of New Zealand is widely expected to raise its official cash rate by a quarter point to 3.0% on Wednesday. Markets imply a 60% chance of another hike in December and an eventual peak around 3.75%, above the central bank’s 3.2% projection.
2. Australian inflation watch
The Australian dollar was steady at $0.7020 ahead of Wednesday’s third-quarter consumer price figures. Core inflation is forecast to rise 1.0%, keeping the annual pace at 3.6%, above the Reserve Bank of Australia’s 2% to 3% target range. Markets imply a 66% chance of a 25-basis-point rate rise to 4.85% on November 3.
3. Policy and bond risks
RBA officials are due to appear before lawmakers as the inflation data is released. FIIG Securities’ Philip Brown said September’s rise in unemployment to 4.7% could limit further tightening, and that continued weak data could lead markets to anticipate rate cuts in 2027.
