AUD/NZD plummets 60 pips as RBNZ matches market expectations of 50bp rate hike

AUD/NZD slumps nearly 60 pips to 1.0980 during early Wednesday morning in Europe as the Reserve Bank of New Zealand (RBNZ) announced its much-awaited interest rate decision. In doing so, the cross-currency pair ignores geopolitical fears surrounding Chin and North Korea, as well as fears of less hawkish RBNZ move due to the natural calamities in New Zealand.

That said, the RBNZ announced its 10^th rate hike as the policymakers struggle to tame the inflation fears, cutting benchmark rate by 0.50% to 4.75%. Following the RBNZ decision, the quarterly Rate Statement said, “There are early signs of lessening price pressures.” The same should challenge the AUD/NZD bears.

Elsewhere, comments from US Secretary of State Antony Blinken and Russian President Vladimir Putin were the top catalysts that weigh on the market sentiment. That said, the US Secretary of State Blinked said the United States suspects China is considering providing military support to Russia. On the same line are the market concerns of the US-Taiwan trade deal. On the other hand, Russia suspended its nuclear arms treaty with the US and pledged to maintain its military actions in Ukraine.

Furthermore, Russian President Vladimir Putin delivered his state of the nation address to Russia’s Federal Assembly while speaking to both houses of parliament on Tuesday. During the speech, Russian President Putin clearly mentioned, “Our task is to lead our economy to new frontiers,” which in turn highlights further geopolitical tension surrounding Ukraine. On the same line, US Deputy Treasury Secretary Wally Adeyemo said on Tuesday, “US and allies plan new sanctions this week to continue to isolate Russia over the war in Ukraine.”

Amid these plays, the US 10-year and two-year treasury bond yields seesaw around the three-month highs marked the previous day while S&P 500 Futures print mild gains despite Wall Street’s negative closing.

Having witnessed the initial reaction of the RBNZ’s move, the AUD/NZD pair traders should concentrate on the risk catalysts, mainly surrounding China and Russia, for clear directions. Should the geopolitical woes keep hunting the market’s optimism, the quote may witness further downside.

Technical analysis

A daily closing below the convergence of the 200-DMA and a two-month-old ascending support line, around 1.1000 by the press time, becomes necessary for the AUD/NZD bears to retake control.