AUD/NZD surpasses 1.1120 as focus shifts to RBA policy

• AUD/NZD has overstepped 1.1120 after a break of morning consolidation.
• A third consecutive 50 bps rate hike is expected from the RBA next week.
• Kiwi bulls have failed to capitalize on higher ANZ- Roy Morgan Consumer Confidence data.

The AUD/NZD pair has turned sideways after a reversal move around the critical support of 1.1100 on Thursday. The cross has given an upside break of the consolidation move formed in a narrow range of 1.1105-1.1119 in the Asian session. The asset is likely to record more gains as investors are expecting a consecutive 50 basis points (bps) interest rate hike by the Reserve Bank of Australia (RBA).

Next week, the RBA will conduct the monthly monetary policy to discuss the Official Cash Rate (OCR). According to a Reuters poll, RBA Governor Philip Lowe will elevate its OCR by 50 bps for the third time consecutively. This will push the OCR to 1.85%. Taking into account the soaring price pressures in the Australian economy, policy tightening measures are needful. The Australian Consumer Price Index (CPI) for the second quarter of CY2022 has climbed to 6.1%.

The inflation rate remained 10 bps lower than the consensus but higher than the prior release of 5.1%. Adding from the Reuters poll, a majority, 19 of 31 economists who had a long-term view on rates, now expect the cash rate to reach 2.35% or higher by end-September. This accelerates the odds of a fourth consecutive 50 bps rate hike as guidance.

On the New Zealand front, kiwi bulls have failed to capitalize on higher ANZ- Roy Morgan Consumer Confidence data. The qualitative data has landed at 81.9, higher than the prior release of 80.5. Next week, the kiwi economy will report the labor market data, which carries significant importance.