AUD/NZD seeks support near 1.0740 ahead of RBA policy, NZ Employment also in focus

• AUD/NZD is looking for a cushion around 1.0740 as the focus shifts to RBA policy.
• A neutral stance is widely anticipated from the RBA as Australian inflation is consistently decelerating.
• Weak NZ Employment (Q1) data might allow the RBNZ to consider a pause in the policy-tightening spell.

The AUD/NZD pair has corrected to near 1.0740 after failing to sustain a rally above 1.0760 in the Asian session. The cross is expected to remain in action ahead of the interest rate decision by the Reserve Bank of Australia (RBA).

A continuation of a neutral policy stance is anticipated from RBA Governor Philip Lowe. Australian inflation is consistently declining for the past three months. The monthly Australian Consumer Price Index (CPI) has already decelerated from the peak of 8.4% recorded in December to 6.3% in March.

Also, RBA policymakers are confident that the Australian economy is expected to face a severe slowdown due to higher interest rates. This may weigh more pressure on Australian inflation ahead.

Apart from that, Wednesday’s Australian Retail Sales data will be keenly watched. Monthly Retail Sales are expected to remain steady at 0.2%.

On the New Zealand front, investors are keenly awaiting the release of the Employment data (Q1), which is scheduled for Wednesday. As per the estimates, the Employment Change is expected to remain steady at 0.2%. While the Unemployment Rate is seen rising to 3.5% from the former release of 3.4%. The quarterly Employment Cost Index is seen unchanged at 1.1%. Fewer job additions and a higher jobless rate would allow the Reserve Bank of New Zealand (RBNZ) to consider a pause in the policy-tightening process.

Investors should note that RBNZ Governor Adrian Orr pushed its Official Cash Rate (OCR) higher surprisingly by 50 basis points (bps) to 5.25% in April to strengthen its defense against persistent inflation.