- NZD/USD is advancing towards 0.6500 as DXY weakness ahead of US PCE.
- The antipodean is performing stronger despite renewed fears of recession.
- A consecutive 50 bps interest rate hike has been announced by the RBNZ.
The NZD/USD pair has displayed a bullish open drive move in the early Tokyo session, following a bullish Wednesday. The asset is rising swiftly after hitting a low of 0.6418. The kiwi bulls got strengthened after the Reserve Bank of New Zealand (RBNZ) elevated its Official Cash Rate (OCR) by 50 basis points (bps).
To combat the soaring inflation, the RBNZ announced a consecutive interest rate hike by 50 bps on Wednesday. The RBNZ is not taking the bullet and passing on the impact of mounting inflationary pressures. Officially, the OCR has reached 2% and the central bank sees more policy tightening in order to curb the price pressures. In the first quarter of CY2022, the annual Consumer Price Index (CPI) was recorded at 6.9%, significantly higher than the targeted boundary of 2%.
While deploying its quantitative measures to safeguard the economy from galloping price pressure, the RBNZ has pressed the recession button. RBNZ Governor Adrian Orr in his speech dictated that a period of recession cannot be ruled out however he is not predicting one. The economy will observe the growth headwinds as elevating interest rates will tighten the liquidity leakage into the economy.
Meanwhile, the US dollar index (DXY) is dragging lower and may hit the round-level support of 102.00. The market participants are cautious ahead of the release of the Core Personal Consumption Expenditure (PCE). A stabled figure of 7% is expected from the core PCE numbers.
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