The AUD/NZD pair has dived significantly below 1.0620 as the Reserve Bank of New Zealand (RBNZ) has surprisingly pushed the Official Cash Rate (OCR) by 50 basis points (bps) to 5.25%. Contrary to that, the street was anticipating a rate hike of 25 bps.

RBNZ Governor Adrian Orr went for a bumper rate hike as New Zealand’s inflation has turned extremely sticky. The quarterly inflation rate has remained steady at 7.2% in the last three quarters.

Reuters reported that the New Zealand economy is expected to have shrunk by 0.3% this quarter, following a 0.6% contraction in the final three months of 2022. Despite the anticipation of a contraction in economic activities, the RBNZ went for a mega rate hike.

Meanwhile, the Australian Dollar has remained in action after the Reserve Bank of Australia (RBA) kept its interest rate policy unchanged as expected by the market participants. RBA Governor Philip Lowe kept rates steady at 3.6% because Australian inflation has started responding significantly to higher interest rates.

Australian monthly Consumer Price Index (CPI) has softened to 6.8% from its peak of 8.4% recorded in December. A further deceleration in Australian inflation is expected as RBA policymakers are anticipating a slowdown in the economic activities ahead. This might cool off the tight labor market and a higher Unemployment Rate would aim to contain persistent inflation.

Going forward, the speech from RBA Governor Philip Lowe will be keenly watched. RBA Governor would deliver guidance on interest rates and the economic outlook.