NZD/USD this week: ahead of RBNZ

By Elizaveta Belugina

The Reserve Bank of New Zealand will conduct a meeting tomorrow evening (21:00 GMT). According to the forecasts, RBNZ will raise its benchmark interest rate by 25 bps to 3.0% within its current tightening cycle – all 17 economists polled by Reuters expect this outcome.

As RBS puts it, it’s hard to sell the currency whose central bank is raising rates when so many others are still glued close to the zero bound and when the Fed makes dovish comments. Still, the specialists underline that New Zealand’s dollar is the world’s most expensive currency in REER terms (real effective exchange rate). In their view, the rallies of NZD/USD to the $0.8700/9000 area should be used for opening short positions on the pair. NZD/USD is currently trading in the $0.8555/8600 area.

There actually are reasons for the central bank not to hurry with a rate hike. These reasons include lower inflation which fell to 1.5% in the first 3 months of the year from 1.6% in Q4 and falling dairy prices which lowers New Zealand’s exports revenue. Even if there’s a hike, traders will be examining the accompanying statement as it may contain comments about foreign exchange rates and general economic outlook and searching for some softer tone coming into the central bank’s next meeting in June. ANZ says that the rate hike expectations are already fully priced in the NZD. This reduces NZD’s chances to jump on the rate hike and increases its potential slide if the RBNZ disappoints.

Before the RBNZ decision pay attention to Australian inflation data (01:30 GMT) and China’s HSBC flash manufacturing PMI (01:45 GMT) earlier on Wednesday.

Chart. Daily NZD/USD

To contact the writer of this story: Elizaveta Belugina at analytics@fxbazooka.com

Scroll to top