AUD/NZD traded near 1.2170 in Asian hours on Wednesday, ending a run of gains that started on 30 March. The pair edged lower after the Reserve Bank of New Zealand kept its Official Cash Rate unchanged at 2.25% at its April meeting.
Markets had largely expected no change, citing uncertainty around growth and inflation, alongside higher oil prices linked to conflict in the Middle East. Attention later turns to an address by RBNZ Governor Dr Anna Breman at the post-meeting press conference.
Drivers Behind The Earlier Rally
The cross had moved up as the Australian Dollar strengthened on improved risk mood after US President Donald Trump announced a two-week pause in military action against Iran. The plan includes a “double-sided ceasefire” linked to Iran reopening the Strait of Hormuz.
The ceasefire could affect inflation expectations and reduce pressure on the Reserve Bank of Australia to tighten policy further. Markets had priced a rate rise towards 4.35% at the May meeting, partly due to higher energy costs after the Strait’s closure.
The RBNZ holds seven policy meetings each year and sets the OCR at each decision. Higher rates tend to support the NZD, while lower rates tend to weaken it, and briefings often follow the announcements.
As of today, April 8, 2026, we see the AUD/NZD pair trading at a more subdued level of 1.0950. This is a significant change from the high of 1.2170 we observed around this time back in 2025. That previous strength was partly driven by geopolitical events that have since been resolved.
What We Are Watching Next
The key driver now is the diverging inflation outlook between the two countries. We have seen Australia’s latest quarterly inflation for Q1 2026 remain stubborn at 3.8%, while New Zealand’s has cooled more significantly to 3.1%. This suggests the Reserve Bank of Australia has more reason to maintain a hawkish stance than the Reserve Bank of New Zealand.
Unlike the temporary relief from the US-Iran ceasefire we saw in 2025, today’s energy markets are influenced by persistent OPEC+ production cuts. These cuts are keeping a floor under oil prices, which continues to feed into Australia’s stickier inflation numbers. This gives the RBA less room to consider easing its policy.
Given this divergence, the interest rate differential is likely to move in the Australian dollar’s favor over the coming weeks. We believe derivative traders should consider buying AUD/NZD call options, possibly with June or July 2026 expiries. This strategy allows for capitalizing on potential upside while clearly defining the maximum risk.
Current implied volatility in the pair is moderate, meaning option premiums are not excessively expensive right now. This presents a favorable entry point for establishing long positions before the central banks’ policy paths diverge more formally. Traders can structure these positions to profit from a gradual grind higher in the exchange rate.
In the near term, we will be watching for the next Australian CPI data and the RBA meeting minutes for further confirmation of this hawkish tilt. Any data point showing persistent price pressures in Australia will likely act as a catalyst for a move higher in AUD/NZD. This will be the main focus for adjusting positions in the weeks ahead.
