More gradual pace of rate cuts from the RBA and RBNZ could offer some support to AUD and NZD – Wells Fargo

What's up for the Down Under economies? Economists at Wells Fargo analyze the Australian and New Zealand Dollars (AUD and NZD) outlook.

US economic slowdown and Fed easing will help AUD and NZD against USD

We do not expect a further RBA rate increase, but with the central bank forecasting above-target inflation for an extended period, we believe rate cuts are some way off. We anticipate an initial 25 bps rate cut at the August meeting, while also acknowledging the balance of risks as tilted toward a later move. 

In New Zealand, we now see RBNZ rate cuts occurring later than previously envisaged, and forecast an initial 25 bps reduction at the August announcement. 

Against a backdrop of a US economic slowdown and Fed easing, a more gradual pace of rate cuts from the RBA and RBNZ could offer some support to the Australian and NZ Dollars against the Greenback over time.