NZD/USD holds comfortably above 0.6000 mark; bulls flirts with multi-week peak
- NZD/USD regains strong positive traction and draws support from a combination of factors.
- Reduced bets for a rate cut by RBNZ and a positive risk tone lend some support to the Kiwi.
- Dovish Fed expectations keep the USD bulls on the defensive and contribute to the move up.
- Investors now look to the RBNZ on Wednesday and the US inflation figures for a fresh impetus.
The NZD/USD pair attracts fresh buyers following an intraday dip to levels below the 0.6000 psychological mark and sticks to its intraday gains through the early part of the European session on Monday. Spot prices currently trade around the 0.6025 area, just a few pips below a three-week top touched on Friday, as traders look to this week's central bank event risk and the crucial US inflation figures for a fresh impetus.
The Reserve Bank of New Zealand (RBNZ) is scheduled to announce its policy decision on Wednesday. From the US, investors will confront the release of the Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday, which might influence expectations about the Federal Reserve's (Fed) policy path. This, in turn, will drive the US Dollar (USD) demand in the near term and provide some meaningful impetus to the NZD/USD pair.
In the meantime, the New Zealand Dollar (NZD) might continue to draw support from last week's better-than-expected jobs report, which lowered the likelihood of a rate cut by the RBNZ. The USD, on the other hand, is undermined by bets for a bigger rate cut of 50 basis points (bps) by the Fed in September. Apart from this, a positive tone around the equity markets turns out to be another factor weighing on the safe-haven buck and benefiting the risk-sensitive Kiwi.
It, however, remains to be seen if bulls can capitalize on the move amid persistent worries about the slowing Chinese economy, which tends to dent demand for antipodean currencies, including the Kiwi. Nevertheless, the recent price action, along with the bearish sentiment surrounding the USD, suggests that the path of least resistance for the NZD/USD pair is to the upside. Hence, any meaningful pullback might be seen as a buying opportunity and remain limited.
Economic Indicator
RBNZ Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.
Read more.Next release: Wed Aug 14, 2024 02:00
Frequency: Irregular
Consensus: 5.5%
Previous: 5.5%
Source: Reserve Bank of New Zealand
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 Adrian Orr’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.
