I think this is the kicker. The market expected a rate rise in Aussie and had it priced in. The statement was relatively neutral so they didn’t react. Employment data here was far stronger than anticipated – waking up the market to the fact that rate hikes are still on the table.

Todays jump is also related to a jump in stocks in the US. Higher equity prices -> lower perceived global risk -> more carry trade.

And if the world does slow, then Australia’s hard commodities like coal and iron will weaken faster than New Zealand’s food…people still have to eat!
But having said that, I can’t see the NZD/AUD much over 0.9000.

If it gets there, its a sell.

Best answer I could give to that is uncertainty. They might want rates to be 1 basis point higher over the next year given current expectations, so they will tell the market that (which will lead to it being priced into the futures market – giving some of the longer term impressions of tightening), but they increase by a quarter at a time given the possibility of a worsening credit crunch.

Also, Central Banks (except in the US) are scared of dropping rates too soon after lifting them, as they think this impacts badly on their image. As a result, they like to be as flexible as possible – slowly lifting rates does this for them.