NZD/USD drops and pops after RBNZ's rate decision
- NZD/USD is witnessing two-way business following RBZN's rate decision.
- The central bank kept rates unchanged and maintained dovish bias, as expected.
- Markets are priced for July rate cut.
The NZD/USD fell 40 pips to a session low of 0.6595 in a knee jerk reaction to dovish forward guidance by Reserve Bank of New Zealand only to rise all the way back to 0.6646.
The Reserve Bank of New Zealand kept its cash rate unchanged at a record low of 1.5%, as expected and said a lower interest rate may be needed over time, courtesy of a weaker global economic outlook and risk of ongoing subdued economic growth.
The dovish comments were in line with expectations. Further, markets have already priced in a 25 basis point rate cut in July. As a result, the Kiwi quickly recovered the 40 pip drop seen immediately after the rate decision.
Looking forward, the NZD/USD could rise to 0.6681 (June 7 high) if treasury yields continue to slide on dovish Federal Reserve expectations.
The Fed, however, pushed back against aggressive rate cut views on Tuesday with St. Louis Federal Reserve Bank President James Bullard stating that the US economic situation isn't dire enough to warrant cutting rates by a half-percentage point at its next meeting in July. As a result, the Kiwi may have a tough time breaking above the immediate resistance at 0.6681. As of writing, the currency pair is trading t 0.6648.
Pivot points
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
