AUD/NZD eyes 1.0800 as RBA policy comes into picture

• AUD/NZD is aiming to recapture the 1.0800 resistance ahead of the RBA policy.
• Due to consistently declining Australian inflation, the RBA is expected to keep interest rates steady at 3.6%.
• The RBNZ would consider a pause in the policy-tightening process amid softening of NZ inflation.

The AUD/NZD pair has extended its recovery above 1.0787 in the Asian session. The cross is expected to continue its recovery towards the round-level resistance of 1.0800. The Australian Dollar is showing resilience despite rising expectations of an unchanged interest rate policy from the Reserve Bank of Australia (RBA).

Australian inflation, released this week, has allowed the RBA to keep its Official Cash Rate (OCR) unchanged. The Australian Bureau of Statistics (ABS) reported that the quarterly Consumer Price Index (CPI) (Q1) accelerated by 1.4% at a higher pace as expected by the market participants but lower than the former pace of 1.9%. Annual inflation softened to 7.0%, a little higher than the estimates of 6.9% but lower than the prior release of 7.8%.

The monthly CPI indicator which has already softened heavily from its peak of 8.4% recorded in December has decelerated further to 6.1% from the consensus of 6.6% and the previous release of 6.8%. Due to consistently declining Australian inflation, RBA Governor Philip Lowe will keep interest rates steady at 3.6%.

Going forward, Australia’s Producer Price Index (PPI) figures will be of utmost importance. A deceleration in prices of goods and services by producers at their factory gates will strengthen the odds of a neutral policy stance by the RBA.

The New Zealand Dollar will be guided by the employment data, which will release on Wednesday. Inflation in New Zealand has also decelerated and it would allow the Reserve Bank of New Zealand (RBNZ) to consider a pause in the policy-tightening process.