AUD/NZD consolidates within this week’s 1.0520-1.0560 ahead of key NZ GDP, Australia jobs data

• AUD/NZD has consolidated within this week’s this week’s thin 1.0520-1.0560ish ranges on Tuesday.
• The pair is awaiting key New Zealand Q3 GDP figures and the Austrlia November jobs report, both out on Thursday.

AUD/NZD has continued to consolidate within this week’s thin 1.0520-1.0560ish ranges on Tuesday as the pair awaits the release of key data out of both Australia and New Zealand later in the week. The main resistance for traders to keep an eye on comes in at 1.0560, while the 1.0500 level is the main area to watch to the downside.

Thursday’s Asia Pacific session will see the release of New Zealand Q3 GDP growth figures, followed by the release of the Australia November jobs report. Both data releases will be watched closely by AUD/NZD traders as both might influence the timeline for RBNZ and RBA policy tightening. The RBNZ has already delivered two 25bps rate hikes to take rates to 0.75%, with more hikes expected to come in 2022 and beyond, while the RBA remains a long way off even lifting rates for the first time since the pandemic.

FX markets have had ample time to price in the large divergence in policy (which drove AUD/NZD much of the weakness in the summer months). Focus has now shifted to whether the RBNZ can live up to market expectations (some fear it can’t/won’t) and on when the RBA’s first rate hike will be coming. Last week’s RBA rate decision was a little more hawkish in tone than anticipated and had analysts speculating that the bank may want to move on rate hikes as soon as mid-2022 – this helped propel AUD/NZD back above 1.0500.

A strong labour market report on Thursday may infuse further hawkish speculation that may further underpin the Aussie. But this may be counteracted if the decline in Q3 NZ GDP isn't as bad as feared (remember, much of the country was in lockdown at the time). A smaller Q3 contraction would embolden the RBNZ to press ahead with the monetary tightening that it knows it needs to do in order to reign in above-target inflation and a hot labour market.  

The main point is that AUD/NZD will be highly sensitive to the data on Thursday. Other data out this week, like Tuesday’s release of NZ Q3 Current Account numbers (2145GMT) and Australian December Westpac Consumer Sentiment survey (at 2330GMT), Thursday’s speech from RBA Governor Philip Lowe and Friday’s NZ December ANZ Business Confidence survey, will all also be of note but is unlikely to dictate the broader narrative.