• AUD/NZD witnessed a dramatic turnaround from a one-week trough touched this Wednesday.
• The RBNZ announced a 50-bps rate cut, which weighs heavily on the NZD and boosts the cross.
• Disappointment over China’s stimulus update undermines the AUD and might cap further gains.

The AUD/NZD cross rebounds from a one-week low touched during the Asian session on Wednesday and the buying interest picks up pace after the Reserve Bank of New Zealand (RBNZ) announced its policy decision. Spot prices rallied to the 1.1050 area in the last hour, closer to the highest level since August 16 touched earlier this week and seem poised to appreciate further. 

As was anticipated, the RBNZ lowered the Official Cash Rate (OCR) by 50 basis points (bps) to 4.75% at the conclusion of the October meeting. In the accompanying policy statement, the central bank noted that excess capacity has dampened inflation expectations, and price and wage changes are now more consistent with a low-inflation environment. This raises the possibility of more rate cuts in the coming months, which, in turn, weighs heavily on the New Zealand Dollar (NZD) and provides a goodish lift to the AUD/NZD cross.