NZD/USD jumps above 0.5760 as RBNZ hikes OCR by 50 bps to 3.5%

• NZD/USD has hit 0.5770 as RBNZ hiked its OCR for the fifth time by 50 bps.
• RBNZ’s interest rates have jumped to 3.5% and the central bank is sticking to its path of bringing price stability.
• The DXY is expected to surrender the immediate cushion of 110.00 on weaker NFP projections.

The NZD/USD pair has picked significant bids and has touched an intraday high of 0.5769 as the Reserve Bank of New Zealand (RBNZ) has hiked its Official Cash Rate (OCR) by 50 basis points (bps) consecutively for the fifth time. The extent of the rate hike is in line with the projections of institutional investors. This has pushed the OCR to 3.5%.

Price pressures in the NZ economy have been recorded at 7.3% for the second quarter of CY2022. Therefore, a continuation of a hawkish policy was highly required. But at the same time, the RBNZ has ditched the growth prospects and has chosen price stability as its foremost priority.

Meanwhile, the US dollar index (DXY) is juggling around the 110.00 ground and is expected to surrender the same sooner amid weaker consensus for US Nonfarm Payrolls (NFP) data. Subdued preliminary estimates for the US Nonfarm Payrolls (NFP) data have been discounted by the market participants. As expected, the US economy created 250k jobs in September, lower than the August reading of 315k. The US economy has been maintaining full employment levels, therefore, space for generating more employment is significantly less. Adding to that, the escalating Federal Reserve (Fed)’s interest rates are also restricting the corporate from continuing their hiring programs with sheer pace.

What could dampen the DXY’s appeal further is the Average Hourly Earnings data. The projections indicate a soft landing at 5.1% vs. the prior release of 5.2%. When households face the headwinds of mounting inflation, lower earnings would be insufficient to offset the inflated payouts.