New Zealand Dollar rallies to 0.5700 vs USD on expected RBNZ rate hike

NZD/USD gains some positive traction after the widely expected RBNZ rate hike.
Renewed US-Iran hostilities underpin the safe-haven USD and cap spot prices.
Reviving inflation fears further support the buck ahead of the FOMC Minutes.

Haresh Menghani FXStreet

The NZD/USD pair attracts some buyers in reaction to the Reserve Bank of New Zealand's (RBNZ) anticipated interest rate hike and reclaims the 0.5700 mark during the Asian session on Wednesday. Spot prices, for now, seem to have snapped a two-day losing streak, though the upside potential seems limited amid geopolitical uncertainties.

As was widely expected, the RBNZ decided to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 2.50% following the conclusion of the June monetary policy meeting. The New Zealand Dollar (NZD) bulls, however, seem hesitant and opt to wait for further insight if this is a one-off move rather than the start of further tightening. Hence, the focus will be on the post-meeting press conference, where comments from RBNZ Governor Dr. Anna Breman will influence the NZD and provide a fresh impetus to the NZD/USD pair.

In the meantime, renewed US-Iran hostilities assist the safe-haven US Dollar (USD) to stand firm near the weekly high, which is seen acting as a headwind for the currency pair. The US military unleashed a new wave of strikes against Iran on Tuesday following reports of attacks on three oil tankers in the Strait of Hormuz, jeopardizing the already fragile ceasefire. The US also moved to withdraw a concession that allowed Iran to sell oil on international markets, triggering a sharp rally in Oil prices and reviving inflation fears.

The concerns, in turn, lift market expectations that the Fed will hike interest rates at least once by the end of this year, triggering a fresh leg up in US Treasury bond yields and further underpinning the Greenback. This contributes to capping the upside for the NZD/USD pair. Traders also seem hesitant and keenly await the release of FOMC Minutes before positioning for the next leg of a directional move, warranting caution before positioning for the resumption of the recent recovery from the year-to-date low, touched in June.

Economic Indicator

RBNZ Press Conference

Following the Reserve Bank of New Zealand's (RBNZ)monetary policy decision, the Governor gives a press conference explaining the rationale behind the decision. The comments may influence the volatility of the New Zealand Dollar (NZD) and determine a short-term positive or negative trend.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Anna Breman's press conference.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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