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Currency Analyst since 2010

NZD/USD after the RBNZ meeting

By Elizabeth Belugina

The Reserve bank of New Zealand left the benchmark rate unchanged at 2.25% despite the expectations of a rate cut. Indeed, the RBNZ cited high commodity prices in some region: lower rate would increase this bubble even more. As a result, NZD/USD rallied towards 0.7000.

Yet, the central bank said that “further policy easing may be required to ensure that future average inflation settles near the middle of the target range”. It means that the RBNZ may actually reduce rate in the coming months. The decision to cut rate will be made in case of lower inflation expectations and worse global outlook. The RBNZ also expressed concerns with high level of the national currency saying that the New Zealand’s dollar “remains higher than appropriate given New Zealand’s low commodity export prices”. It means that the higher NZD/USD goes, the more likely will the rate cut be.

NZD/USD is now trading above the level, where it was when the RBNZ reduced rate in March. The expectations of a future rate cut won’t let NZD to get very high.

Resistance is at 0.7050 (April high) and 0.7100 (top of the uptrend since January). Support is at 0.6890 and 0.6780. 

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