AUD/NZD rebounds towards 1.1360, focus shifts to RBA/RBNZ monetary policy

• AUD/NZD has picked bids around 1.1330 but seems to remain lackluster ahead of policy meetings.
• Both RBA and the RBNZ will announce their monetary policies next week.
• The RBA is not expected to sound extremely hawkish while the RBNZ will continue its 50 bps hike pattern.

The AUD/NZD pair has recovered sharply after picking bids near 1.1327 in the Tokyo session. The asset is expected to test the downside break of the consolidation formed in a range of 1.1364-1.1412. On a broader note, the cross has corrected sharply after surrendering the round-level cushion of 1.1400. The asset is expected to remain on the sidelines ahead of the interest rate decision by the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ).

The monetary policy meeting of the RBA is scheduled for Tuesday and RBA Governor Philip Lowe is not expected to sound extremely hawkish considering their options for the extent of the rate hike considered in the September meeting. As per RBA minutes, the RBA announced a fourth consecutive rate hike of 50 basis points (bps) but also considered the option of 25 bps.

The official Cash Rate (OCR) was pushed to 2.35% in September monetary policy meeting. RBA Governor Philip Lowe is continuously accelerating the OCR to scale down the soaring price pressures. The Australian inflation rate has already increased to 6.1%, reading belongs to the second quarter of CY2022.

Apart from that, the RBA policymakers cited that the OCR is expected to peak around 3.85% and the inflation rate will top around 7%. With the current pace of hiking the OCR by 50 bps, the central bank will reach the desired target by December 2022.

On the kiwi front, a Reuters poll on the RBNZ rate hike forecast, scheduled on Wednesday, claims a fifth consecutive rate hike by 50 basis points (bps). A fifth half-a-percent rate hike by the RBNZ Governor Adrian Orr will push the Official Cash Rate (OCR) to 3.5%. It would be worth watching whether an OCR above 3% is sufficient to anchor the galloping inflation.