- NZD/USD drops during the day by some 0.36% as investors prepare for the RBNZ.
- Mixed US economic data reignited recession fears in the US.
- The RBNZ is expected to hike the OCR by 50 bps to 3% on Wednesday.
The NZD/USD tumbles in the North American session, due to broad US dollar strength, despite a risk-on impulse in the financial markets, after US economic data came mixed, so recession fears reemerged. At the time of writing the NZD/USD is trading at 0.6341, down 0.35%.
US equities reflect investors’ upbeat mood, courtesy of positive US data. Industrial Production for July increased at a 0.6% MoM pace, exceeding estimations, underpinned by motor vehicle sales. Even though the news was positive, the Building Permits and Housing Starts missing estimations, recording negative prints, put a cap on higher US dollar prices.
Therefore, the NZD/USD trimmed some of its earlier losses after hitting a daily low at 0.6316. However, a monetary decision of the Reserve Bank of New Zealand (RBNZ) looming keeps NZD/USD buyers hopeful of higher prices, with expectations of a 50 bps hike fully priced in.
According to a Reuters poll, the RBNZ is expected to increase the Overnight Cash Rate (OCR) by 50 bps to 3.00%, which would be its most aggressive tightening since 1999.
Also read: RBNZ Preview: Forecasts from five major banks, all eyes on future policy path
In the meantime, five major banks, in their previews, expect that the RBNZ will hike rates by 50 bps on Wednesday, but there are some differences regarding the forward guidance the bank will use.
ANZ and Westpac expect a hawkish commentary, and the central bank would clearly communicate that the fight against inflation is well underway.
Bank of America estimates that guidance would remain hawkish, but they expect the bank to add “conditionality” on the scale of following rate hikes. Additionally, expect the bank to acknowledge that growth is softening.
TDS estimates the bank will emphasize that inflation risks are skewed to the upside and should dominate the RBNZ’s communication. Contrarily, ING estimates the bank would hike 50 bps but suggests the RBNZ “will have to revise its rate path projections lower.”
What to watch
On Wednesday, the Reserve Bank of New Zealand will unveil its monetary policy decision. On the US front, the docket will feature US Retail Sales, FOMC’s July minutes, and Fed speaking.
NZD/USD Key Technical Levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD hovers around 0.6500 amid light trading, ahead of US GDP
AUD/USD is trading close to 0.6500 in Asian trading on Thursday, lacking a clear directional impetus amid an Anzac Day holiday in Australia. Meanwhile, traders stay cautious due ti risk-aversion and ahead of the key US Q1 GDP release.
USD/JPY finds its highest bids since 1990, near 155.50
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, testing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming Japanese intervention risks. Focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold price lacks firm intraday direction, holds steady above $2,300 ahead of US data
Gold price remains confined in a narrow band for the second straight day on Thursday. Reduced Fed rate cut bets and a positive risk tone cap the upside for the commodity. Traders now await key US macro data before positioning for the near-term trajectory.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price. Coupled with broader market gloom, INJ token’s doomed days may not be over yet.
Meta Platforms Earnings: META sinks 10% on lower Q2 revenue guidance Premium
This must be "opposites" week. While Doppelganger Tesla rode horrible misses on Tuesday to a double-digit rally, Meta Platforms produced impressive beats above Wall Street consensus after the close on Wednesday, only to watch the share price collapse by nearly 10%.