AUD/NZD eases from 1.1590, after hitting fresh 12-year highs

• The Aussie Dollar surged nearly 2.5% against a weaker Kiwi over the last two weeks.
• RBA-RBNZ monetary policy divergence is bleeding the Kiwi.
• Steady New Zealand's inflation figures are paving the path for further RBNZ easing.

The Aussie Dollar has rallied well beyond 2% against its New Zealand counterpart over the last two weeks, reaching 12-year highs near 1.1600. RBA-RBNZ monetary policy divergence and weak New Zealand macroeconomic figures are crushing investors' confidence in the New Zealand Dollar.

The Reserve Bank of New Zealand rattled markets last month with a Jumbo (50 basis point) rate cut, and is expected to lower interest rates further in the coming months, in an attempt to support an ailing economic growth. New Zealand's Gross Domestic Product (GDP) shrank at a 0.9% pace in the second quarter and has contracted in three of the last five quarters.

Data released earlier on Tuesday revealed that the RBNZ Inflation expectations for the last quarter of the year remain anchored at a 2.28% yearly pace, which provides some leeway for the central bank for further monetary easing.

The RBA, on the other hand, is showing a more hawkishly tilted monetary policy stance, thus creating an AUD-supportive policy divergence.  The bank kept its benchmark interest rate unchanged at 3.6% last week and warned about upside risks to inflation, which curbed hopes of any further rate cut in the near term.