AUD/NZD jumps as RBA strikes hawkish tone and RBNZ surprises with hold

Key points:

• RBA Governor Michele Bullock warned inflation is far too high and could top the figures in the August forecasts. The third-quarter trimmed mean CPI came in at 3.7% year on year, above estimates, making a hike on November 3 more likely.
• The RBNZ kept the official cash rate at 2.75% by a 4-3 vote, a result traders had not priced in, and Governor Breman later said further hikes are likely at coming meetings.
• The New Zealand dollar tumbled, the Australian dollar strengthened, and AUD/NZD moved sharply higher.
• Oil prices gained, with Brent near $115, after Yemen's Houthis claimed a strike on Saudi Arabia's largest refinery and the WSJ reported US warnings to Gulf states about a possible post-midterms campaign against Iran.
• Israeli exit polls suggested no clear winner in the election.
• The Kospi jumped 6% as SK Hynix reported a roughly sevenfold rise in third-quarter operating profit and unveiled about $75 billion in shareholder returns, while the Nikkei advanced 1.4%.
• US Treasury Secretary Scott Bessent said crypto rules can still move forward through agency action even though the Senate did not pass the Clarity Act.

Australia — Bullock and the latest CPI numbers point toward a rate rise in November. Speaking during Senate Estimates, RBA Governor Michele Bullock sounded hawkish, saying inflation was likely to exceed the bank's August projections as the Middle East conflict re-escalates and pushes energy costs up, while the labour market appeared slightly tighter than earlier assessed. After the inflation release, she described inflation as far too high, said supply shocks were hard to look through completely and noted that domestic demand still outstrips supply, but she would not be drawn on guidance for next week's decision.

The September-quarter CPI figures supported her concerns. The trimmed mean — the RBA's preferred measure of underlying inflation — gained 1.0% over the quarter and 3.7% from a year earlier, beating the 3.6% forecast, while monthly headline CPI moved up to 4.3% in September. Taken together, the inflation data and Bullock's remarks raise the likelihood of a rate increase when the Board wraps up its November 3 meeting.

New Zealand — a surprise pause followed by hawkish guidance. The RBNZ left its official cash rate at 2.75% on a 4-3 vote, bucking around 90% market bets on a hike and the predictions of every one of the five major domestic banks. The majority, with Governor Anna Breman among them, pointed to lower-than-expected headline inflation of 3.7%, limited pass-through from fuel costs and soft wages, although all members agreed that policy probably needs to be tightened. At a press conference, Breman said coming meetings were likely to bring further increases, potentially reaching restrictive territory, and that a persistently weak New Zealand dollar could feed imported inflation.

FX — policy divergence lifts AUD/NZD. The kiwi dropped sharply once the RBNZ announcement landed, while the Australian dollar advanced on the stronger CPI reading and Bullock's remarks. With the two central banks sending different signals, AUD/NZD climbed steeply.

Oil and geopolitics — supply risks return. Brent moved up to around $115 a barrel after the Houthis in Yemen said they had hit Saudi Arabia's largest refinery, a claim Saudi authorities did not confirm immediately. Geopolitical worries got an extra boost from a Wall Street Journal report saying Washington had told several Gulf Arab states to be ready for a possible short, intense military campaign against Iran following the November 3 midterm elections; President Donald Trump is leaning toward a large strike but has not decided. Market participants also talked about the chances of fresh Israeli strikes on Iran, even though Israel's defence minister said no attack was planned before the election. Tuesday's Israeli exit polls pointed to no decisive outcome, with official results expected on November 4.

Equities — Kospi soars on SK Hynix results. Asia-Pacific shares tracked Wall Street higher, with the Nasdaq leading the US advance. South Korea was the top performer: the Kospi surged 6% and the Kosdaq rose 3% after SK Hynix booked a roughly sevenfold increase in third-quarter operating profit, to around 83 trillion won, ahead of expectations, helped by a surge in memory-chip prices on AI demand. The company also announced about 100 trillion won — roughly $75 billion — in shareholder returns for 2026, made up of more than 60 trillion won for share buybacks and cancellations and more than 30 trillion won for dividends, plus a quarterly dividend of 20,000 won per share. Net profit came up short of forecasts, and SK Hynix said it expects DRAM demand to grow by a mid-20% rate in 2027. Elsewhere, Japan's Nikkei gained 1.4%, China's Shanghai Composite rose 0.5% and Hong Kong's Hang Seng advanced 0.2%.

Crypto policy — Bessent points to agency route. US Treasury Secretary Scott Bessent argued that Washington can still produce crypto regulation without fresh legislation. At Ripple's Swell conference, he called the Senate's failure to pass the Clarity Act disappointing, while saying the Treasury would use its convening power to push a regulatory framework forward through agency action alongside the Securities and Exchange Commission and the Commodity Futures Trading Commission.