AUD/NZD renews six-week high below 1.0900 as New Zealand Q1 CPI plummets

• AUD/NZD jumps 50 pips as New Zealand inflation pours cold water on the face of RBNZ hawks.
• RBA’s efforts to push back dovish bias, optimism ahead of key Aussie data/events also favor AUD/NZD bulls.
• PBOC Interest Rate Decision may not entertain with status quo but will be important to watch for clear directions.

AUD/NZD takes the bids to refresh a 1.5-month high after downbeat New Zealand (NZ) inflation numbers, released early Thursday in Asia.

In doing so, the exotic pair also justifies the Australian Dollar’s (AUD) comparative strength amid the Reserve Bank of Australia’s (RBA) recent defense of the hawkish monetary policy stance and the confirmation of upbeat economic conditions.

The first quarter (Q1) 2023’s print of New Zealand’s (NZ) headline inflation, per the Consumer Price Index (CPI), released by Statistics New Zealand poured cold water on the face of the policy hawks at the Reserve Bank of New Zealand (RBNZ) by offering a negative surprise. That said, the NZ CPI drops to 1.2% QoQ versus the expected 1.7% and 1.4% prior.

Also read: Breaking: New Zealand Q1 CPI slides to 1.2% QoQ while driving down NZD/USD to 0.6175

The inflation numbers came in well below the RBNZ’s February forecast of 7.3% and prods the latest hawkish move of New Zealand’s central bank, suggesting a negative surprise in the next meeting, which in turn drowns the New Zealand Dollar (NZD).

It’s worth noting that the optimism surrounding China, as per the latest comments from the National Development and Reform Commission (NDRC), also underpins the AUD’s strength and allows the AUD/NZD pair to remain firmer. On Wednesday, China’s NDRC, the state planner, said that the country is formulating plans to boost the recovery and expansion of consumption.

On the contrary, a notable jump in the inflation numbers at the other key global economies joined the hawkish comments from the top-tier central bank officials to renew fears of higher rates and recession, which in turn tame the AUD/NZD pair’s upside moves. On the same line could be the war fears emanating from China and Russia.

Looking forward, National Australia Bank’s (NAB) Business Confidence for the first quarter (Q1), expected 2 versus -1 expected, will precede Reserve Bank of Australia (RBA) Governor Philip Lowe’s independent review of the central bank to guide intraday moves of the AUD/NZD pair. Also important to watch will be the monetary policy meeting of the People’s Bank of China, (PBOC), even if it is unexpected to announce any change in the current benchmark rate of 3.65%.

Technical analysis

A clear upside break of March’s high of around 1.0895 becomes necessary for the AUD/NZD bulls to keep the reins.