RBNZ Hikes Again
The New Zealand Dollar is seeing better demand across the European open on Wednesday following a hawkish RBNZ meeting overnight. The RBNZ was seen hiking rates by a further .5% as expected, however, the accompanying statement and outlook was firmly hawkish, keeping NZD well supported. There had been some speculation ahead of the event that the RBNZ might soften its outlook given the recent deterioration in consumer and business confidence. However, along with this month’s .5% hike, the RBNZ signalled its intention to continue hiking rates in order to battle inflation.
Further Tightening Coming
Looking ahead, the RBNZ noted: "The Committee agreed to maintain its approach of briskly lifting the OCR until it is confident that monetary conditions are sufficient to constrain inflation expectations and bring consumer price inflation to within the target range." With this latest increase in rates, the RBNZ official cash rate is now back at its highest level since 2016. The RBNZ has been among the most hawkish of the G10 central banks in removing pandemic-era accommodative monetary policy.
CPI In Focus Next Week
On the back of this month’s meeting, traders will now be looking to next week’s CPI data for the latest insight into the movement in consumer prices. With the RBNZ’s outlook on rates very much linked to inflation, there are clear two way risks moving forward. Should inflation continue to run hot, beating expectations, this will no doubt keep NZD supported as traders eye the likelihood of increased, aggressive action from the RBNZ. However, should CPI begin to moderate at any point, this will no doubt raise the prospect of the RBNZ backing off from rate hikes near-term, either in pausing hikes or adopting a slower pace of hiking, weighing on NZD near-term.
With rates currently ten times higher than the 0.25% record lows over the course of the pandemic, the desire from the RBNZ to curb inflation is clear. With this in mind, next week’s inflation data will be a key release for NZD traders, with the potential to cause plenty of volatility.
Technical Views
EURNZD
The breakdown below the rising trend line EURNZD has seen the market breaking through key support at 1.6538. The pair is now sitting on support at the 1.6351 level. With both MACD and RSI bearish, the market is vulnerable to a further drop lower. A break below current lows will open the way for a test of the 1.6113 level next with 1.5641 the deeper target below that.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.