AUD/NZD rallies as RBNZ surprised markets by larger than expected rate cut

• RBNZ announces a 0.5% rate cut versus 0.25% market consensus.
• The US-China trade headlines continue to flash mixed signals.
• People’s Bank of China (PBOC) let the USD/CNY fix appreciate.

AUD/NZD flashes fresh high of the month while taking rounds to 1.0452 after the Reserve Bank of New Zealand (RBNZ) announced a higher than expected rate cut on early Wednesday.

The New Zealand central bank defied market expectations of 0.25% Official Cash Rate (OCR) cut with a whopping 0.5% cut to the record low of 1.0%.

Elsewhere, risk tone again turned heavy during the early Asian session as Chinese media kept criticizing the US while also letting the Chinese Yuan (CNY) down against the US Dollar (USD) after stepping back from a currency war the day before. It’s worth noting that China’s Global Times also showed the dragon nation’s readiness to bear the US tariffs, which in turn spots the absence of normalcy between the US-China relation.

On the economic front, Australia’s AiG Performance of Construction Index (July) dropped below 43.0 prior to 39.1 whereas June month Home Loans contracted 0.9% versus expected expansion of +0.6%.

Given the initial market reaction to the RBNZ, investors will now await comments from the Reserve Bank of Australia’s (RBA) Assistant Governor Michele Bullock ahead of Thursday’s Chinese trade data and Friday’s Monetary Policy Statement from the RBA.

Technical Analysis

While Tuesday’s low near 1.0263 becomes the key support for bears to watch, pair’s run-up beyond 1.0460 enables it to again target early July highs near 1.0555.