AUD/NZD Strengthens as Oil Prices Ease, RBA Hike Odds Soften

The Australian and New Zealand dollars have strengthened as oil prices ease, leading investors to reassess their bets on interest rate hikes.

A cooler oil market has reduced concerns about inflation, allowing the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) to potentially be less aggressive in their monetary policies.

This shift is reflected in rates markets, with traders cutting the implied odds of an RBA hike next month from 40% to 30%. The two-year swap rate in New Zealand fell to 3.7219%, indicating a decrease in expected short-term interest rates.

The Australian dollar rose to $0.7001 and the New Zealand dollar to $0.5798, following the drop in local yields as traders wait for the next inflation update to confirm whether price pressures are truly cooling.