RBNZ Catapults NZD/USD on Possible 2H 2022 OCR Hike

New Zealand dollar, NZD / USD, RBNZ, interest rate swap points

  • The Reserve Bank of New Zealand is expected to keep the cash rate at 0.25% overnight
  • The LSAP and FLP programs remained stable as the economic outlook remains uncertain
  • NZD / USD According to the RBNZ policy statement, it is rising

The Reserve Bank of New Zealand (RBNZ) kept its overnight rate (OCR) at 0.25% at its May meeting. NZD/USD after the decision to cross the goods, when the traders entered the underlying statement, it shook higher. Although the decision was in line with the consensus forecast, the central bank appears to be growing less dovish, OCR has risen in the second quarter of next year.

Outside its main policy instrument, the central bank’s additional policy instruments, the Large-Scale Asset Purchase Program (LSAP) and the Loan Financing Program (FLP) did not change. The LSAP was maintained $ 100 billion, although it does not exceed this limit. It is important to note that this is indeed a limit, not a target. Same time as FLPs were extended, both programs were launched to address the economic consequences of the ongoing Covid pandemic and have so far been effective in achieving the intended goal. With regard to closely monitored domestic prices, the RBNZ statement shows that the upward pressure is easing.

The outlook for the renewed economy was broadly in line with the February forecast. The annual growth until the end of 2022 was 3.9%. RBNZ forecasts provided better-than-expected labor force data: unemployment in the first quarter fell from 4.9% in the previous quarter to 4.7% and the wage rate rose to 1.6%. Q2 labor market data cross wires in early August. Inflation has exceeded expectations even late – the consumer price index (CPI) was + 1.5% in the first quarter.

However, the statement warns of an ongoing pandemic as a greater uncertainty of the forecast. In general, RBNZ’s policy in nominal terms is largely unchanged, but improved economic conditions have pushed the central bank’s tone less than before. The New Zealand dollar could benefit from this if Covid’s situation continues to improve, leaving the path to policy tightening.

NZD / USD Technical Outlook

The technical position of the New Zealand dollar has strengthened significantly against the euro US dollar, with the currency pair outperforming the trend line resistance previously supported. The decisive crossing of the trend line now focuses on the 0.7305 peak of several months at the beginning of May. The trend line is likely to support the next negative step. The MACD appears to be preparing for a potential rupture above its signal line, which is a bullish signal. In addition, the relative strength index (RSI) rises from neutral 50.

NZD / USD daily card

nzdusd rbnz

The chart is created using TradingView


– Written by analyst Thomas Westwater

To contact Thomas, use the comments section below or @FxWestwaterTwitter


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