At around 0.7880, the NZD/USD is opening the Asian session threatening to break through the top end of the 0.7685-0.7900 range. A surging AUD and broadly weaker USD have both conspired to send the NZD higher. Yesterday’s seemingly innocuous RBA minutes proved to be the catalyst for a sharp rally in the AUD. The RBA retained its easing bias, but noted the inflation outlook was now stronger thanks to the 10% depreciation in the AUD. In response, Aussie interest rate markets trimmed the chances of an August RBA rate cut to around 50% (from closer to 70%), and the AUD/USD jumped around a cent to above 0.9240. The AUD’s outsized reaction probably had a lot to do with the fact short positions in the AUD had been running close to the highest on record.
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