When is the RBNZ and how it could affect NZD/USD?
Early Wednesday at 01:00 GMT market sees the key monetary policy decision by the Reserve Bank of New Zealand (RBNZ) amid hopes of another hawkish play by the New Zealand central bank.
RBNZ is expected to announce the tenth back-to-back increase in its benchmark interest rate, from 3.5% to 4.25%. In doing so, New Zealand’s central bank is up for the first 75 basis points (bps) of a rate hike.
Although the rate hike is mostly priced in, the quarterly Monetary Policy Statement and the press conference by RBNZ Governor Adrian Orr make the event crucial for NZD/USD traders, especially when global inflation fears abate. The stated event is at 02:00 GMT.
Ahead of the event, Australia and New Zealand Banking Group (ANZ) said,
We expect the Monetary Policy Committee to step up the pace of interest rate rises by delivering a 75bp hike to 4.25%. While it’s not clear how seriously a 75bp hike was considered in the October Review, recent upside surprises on both non-tradable and wage inflation suggest the RBNZ has a bigger ‘sticky’ inflation problem than previously thought. Combine that with measures of inflation expectations either remaining too high, or going the wrong way, and the case to hike by 75bps becomes quite compelling.
On the same line, analysts at Westpac said,
RBNZ Monetary Policy Statement is expected by most economists (including Westpac’s) to deliver a 75bp rate hike to 4.25%, along with a higher OCR forecast, in order to quell inflation pressures. Market pricing is a little short of a 75bp hike, sitting around 4.19%.
Considering the market consensus, FXStreet’s Dhwani Mehta said,
NZD/USD could fall back toward the 0.6000 threshold on a ‘sell the fact’ effect should the Reserve Bank of New Zealand conform to the market expectations of a super-sized lift-off.
How could it affect NZD/USD?
NZD/USD remains sidelined around 0.6150 ahead of the key RBNZ announcements. Also increasing the pair trader’s anxiety are the scheduled release of the preliminary monthly activity data for November and Minutes of the US Federal Reserve’s (Fed) latest minutes
That said, early signals from the RBNZ have already confirmed a 75 bps increase in the Official Cash Rate (OCR) and the same may not please bulls apart from providing an immediate upside. Traders will be more interested in signals for the central bank’s future moves and hence the discussions over the OCR peak, as well as the quarterly economic projections, will be crucial for clear directions.
Technically, a clear break of the recent trading range between 0.6060 and 0.6200 appears necessary for clear directions. That said, a convergence of the 200-EMA and ascending trend line from October 13, around 0.5940, appears an additional important support to watch during the quote’s surprise downside.
Keynotes
NZD/USD portrays pre-RBNZ caution around 0.6150, FOMC Minutes eyed as well
RBNZ Interest Rate Decision Preview: NZD/USD – Buy the rumor, sell the fact on a 75 bps hike
About the RBNZ interest rate decision and rate statement
The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.