Date: 17 Sep 2018

Tuesday will see the release of the latest Reserve Bank of Australia (RBA) policy meeting minutes at 0230h UK time. While there might be an expectation that the RBA will maintain a degree of optimism about growth in the Australian economy but also note continuing risks to that growth from both domestic and international developments, what might be more interesting for markets is if the RBA makes reference to recent increases in mortgage rates that have been made by Australian banks without the RBA having hiked their benchmark rate. If the RBA chooses to infer that the likelihood of a future rate hike has been affected by these mortgage rate increases, traders might see that as a negative for the Australian dollar (AUDUSD). Springing forward to Wednesday and New Zealand will publish its second-quarter GDP data (at 2345h UK time) with economists expecting an expansion of 0.8 percent quarter-on-quarter, up from the previous 0.5 percent print. Given that the Reserve Bank of New Zealand (RBNZ) has previously cited weaker business confidence as an obstacle to tighter monetary policy (and even a possible justification for further easing), an above-forecast GDP print could cause traders to think the RBNZ will become less dovish in its pronouncements. That could give the New Zealand dollar (NZDUSD) some support although traders will be aware that the NZD, as well as the AUD, seem currently just as (if not more) susceptible to international than to domestic factors. At the very least though, if traders do feel that, in the event, both these scenarios play out, the NZD offers slightly better value than the AUD, traders might choose to look at AUDNZD to express that view.

by Neal Kimberley, External Currency Analyst.