AUD Lags NZD as RBA Hints at Rate Stability

TD Securities' Macro Research believes that the Australian Dollar will continue to underperform against the New Zealand Dollar following the Reserve Bank of Australia's (RBA) September decision to keep interest rates at 4.60%.

The RBA acknowledged that consumption, housing, and labour conditions were easing broadly as expected, which TD Securities sees as a sign that the bank is not emphasizing domestic pressures to be overheating.

In fact, according to TD Securities, the longer the RBA leaves the decision to hike interest rates, the more likely it will be for the bank to keep the cash rate on hold against a weakening in domestic activity.

This view is supported by recent data from ANZ, which shows that consumer inflation expectations peaked three weeks ago and household spending declined in August across six of nine categories, despite a 2.3% month-over-month gain in transport spending.