The AUD/NZD exchange rate fell to about 1.1440 after the Reserve Bank of Australia (RBA) kept its Official Cash Rate steady at 3.6%. This move was expected given the rise in inflation in Australia during the third quarter. Meanwhile, the New Zealand Dollar gained strength as the Reserve Bank of New Zealand paused its monetary easing after recently lowering rates by 25 basis points to 2.25%. The Australian Dollar is losing value against major currencies, particularly the Swiss Franc. Inflation pressures in Australia increased by 3.2% year-on-year in the third quarter. This has led to speculation that the RBA might raise rates by mid-2026 if inflation remains high. The RBA’s upcoming decisions could depend on November’s labor market data, which is predicted to show an addition of 20,000 jobs, down from 42,200 in October. The Unemployment Rate could rise to 4.4% from 4.3%.

RBA Monetary Policy Tools

The RBA controls monetary policy and ensures price stability mainly through interest rate adjustments. These changes affect the strength of the Australian Dollar. When inflation goes up, interest rates typically rise, attracting investment and supporting the AUD. The RBA also uses tools like Quantitative Easing (QE) and Quantitative Tightening (QT) to influence the economy and the AUD. With the RBA maintaining its cash rate at 3.6%, the Australian dollar is weakening, especially against the New Zealand dollar, which is now around 1.1440. This pause by the RBA comes after Q3 inflation figures showed a persistent 3.2%. The market is starting to see a separation between the RBA and other central banks. The difference in policy with New Zealand is notably large, helping to strengthen the NZD. The Reserve Bank of New Zealand has a cash rate set at a much higher 5.5%, a level they have kept steady since July 2025. This is due to New Zealand’s inflation, which was 4.1% for the quarter ending in September, forcing the RBNZ to keep its hawkish approach.

Australian Labor Market and Its Impact

Now, we focus on the Australian labor market data due this Thursday. The expectation is a slowdown, with only 20,000 jobs expected to be created and the unemployment rate rising to 4.4%. A weak report would confirm the RBA’s decision to stay put and likely push the AUD/NZD lower. For derivative traders, this presents a clear chance to prepare for further AUD weakness against the NZD in the coming weeks. We recommend buying AUD/NZD put options that expire in January 2026 as a way to take advantage of this policy difference. This strategy would directly benefit if this week’s job data is weaker than expected. Looking back at the 2023 rate cycle, we learned that differing policies can create lasting trends in currency pairs. The current scenario could drive the AUD/NZD toward support levels near 1.1250, a level not seen since the second quarter of this year. For now, we consider the 1.1500 level to be significant resistance. Create your live VT Markets account and start trading now.

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