FxWirePro: Aussie momentary drops owing to RBA Governor Steven’s final speech before retirement, RBNZ to weigh more in AUD/NZD

In Australia, RBA Governor Stevens will deliver his final speech before retirement at 1pm AEST.

The AUD continued to grind higher today with the USD on the back foot against most major currencies. NZD also rallied despite the market continuing to price in additional rate cuts this year.

Today, the market will be fixated on RBA Governors Stevens’ last speech. Some in the market are hoping to hear something dovish.

Over the longer-term, we expect AU growth to remain subpar and AUD to drift lower. There are a few key things to watch in 2016. Governor Stevens retires in Sept 2016 and AU’s current account deficit as well is also worth tracking.

Whereas the RBNZ is scheduled today to deliver monetary policy changes as the central bank made it clear last month that it would be returning to the easing table, and like the consensus, we expect a 25bp OCR cut to 2.0% this week – an all-time low.

As early as March the central bank had cut rates due to the strong NZD. And only last month it pointed out that the kiwi is still trading approx. 6% stronger on a trade-weighted basis than it had assumed in its projections. Based on these projections the RBNZ even expects NZD to depreciate by an impressive 8% by year end.

The kiwi dollar was lower against the Australian dollar, with AUDNZD edging up at 1.0672, given a key resistance is broken at 1.0707 levels, further upside can’t be ruled out on disappointment and it is likely to spike higher after the NZ central bank eases as forecasted.