⚖️🇦🇺🇳🇿AUD/NZD Follows Rate Spreads Higher: Cable FX Macro

• The recent rise in the aussie/kiwi rate has taken it to levels not seen in about three years, marking a significant shift in the dynamics of the currency pair. This increase can be attributed to a combination of factors, including disappointing GDP data from New Zealand and unexpectedly high inflation figures emerging from Australia. As a result, traders have been compelled to re-evaluate and reprice the antipodean currencies, leading to widening spreads. The market's reaction reflects a growing concern over New Zealand's economic performance, juxtaposed with Australia's more robust inflationary pressures, which have prompted investors to reassess their positions in these currencies.

• On Wednesday, the AGB 3-year yield rose by 7 basis points to reach 3.51%. This upward movement in yields is indicative of changing investor sentiment and expectations regarding future interest rates. It is worth noting that on the same day, the Reserve Bank of New Zealand (RBNZ) underwent a leadership transition, welcoming a new governor. Despite this change at the helm, analysts have expressed skepticism regarding any immediate shifts in the central bank's policy direction. The consensus suggests that the new governor is likely to maintain the existing stance of the RBNZ, which is focused on addressing current economic challenges without making abrupt changes to monetary policy. This continuity is crucial for market stability, as stakeholders seek clarity in the RBNZ's approach amidst fluctuating economic indicators.

• The main risk event for spreads will be the upcoming Reserve Bank of Australia (RBA) meeting, scheduled for next week. This meeting is highly anticipated by market participants, as it has the potential to influence interest rates and monetary policy direction significantly. Investors will be closely monitoring the RBA's statements and any indications regarding future rate hikes or adjustments in economic outlook. Given the current economic landscape, characterized by rising inflation and varying growth rates between Australia and New Zealand, the RBA's decisions could further impact the aussie/kiwi rate and the associated spreads. The outcome of this meeting will likely shape trading strategies and market sentiment in the days following the announcement, making it a pivotal moment for traders involved in these currencies.