NZD/USD Falls after RBNZ Stood Pat on Interest Rates

  • NZDUSD
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NZD/USD Analysis

The Reserve Bank of New Zealand is a front-runner amongst its counterparts in monetary tightening, having delivered 525 basis points of hikes since the October 2021 lift-off. It paused over the summer though and today it kept rates at 5.5% for third straight meeting. [1]

Inflation has moderated to 6% y/y in Q2 and the bank believes the current level of interest rate is working, expecting CPI to recede within the 1-3% target in around a year, according to July's most recent projections [2]. On the other hand, the economy posted a surprise rebound in Q2 (+0.9% q/q) and employment remains "above its maximum sustainable level", despite signs of cooling.

The bank noted that the official cash rate (OCR) needs to "stay at a restrictive level" and its forecasts show a terminal rate of 5.6%, implying that there may be room for further tightening. Policymakers however did not hint to any more moves, in a statement that had a dovish tilt.

NZD/USD reacted negatively to today's RBNZ decision, also weighed by the USDollar strength due to the Fed's hawkish bias. It flirts with new 2023 lows that will expose it to 0.5753-39, although fresh catalyst would likely be required for a breach.

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We can see the Kiwi trying to return above the EMA200 and a successful effort could pause the bearish bias, but does not inspire confidence for meaningful rebound under current conditions. The upside looks unfriendly with a thick daily ichimokou Cloud looming.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 04 Oct 2023 https://www.rbnz.govt.nz/hub/news/2023/10/official-cash-rate-remains

2

Retrieved 15 Jul 2024 https://www.rbnz.govt.nz/hub/-/media/project/sites/rbnz/files/publications/monetary-policy-statements/2023/august/mpsaug23.pdf

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