NZD/USD sitting on the bid ahead of the RBNZ

NZD/USD is trading at 0.7053 and up by 0.1% at the time of writing having travelled between a low of 0.7044 and a high of 0.7056 as traders get set for the Reserve Bank of New Zealand.

Generalised USD weakness is keeping the commodity complex bid and subsequently lifting the kiwi in early Asia.

Risk assets also rallied along with rates in spite of the strong Consumer Price Index data. 

Lower US bond yields on the back of the markets coming into line with a dovish Federal Reserve has been the theme to start the week.

Meanwhile, the focus turns to the RBNZ decision where policy is expected to remain unchanged and the impact on the NZD should be limited.

With that being said, a hawkish surprise would bring in the 0.71 area as a critical resistance in play. A dovish surprise leaves the 0.70 figure exposed. 

''We expect the RBNZ to sound similarly relaxed about the evident increase in inflation pressures here in New Zealand, as they’ve been clear that they’d rather err on the side of risking inflation being too high than too low from this starting point,'' analysts at ANZ bank explained. 

''The RBNZ’s tone is likely to be more dovish and circumspect than what’s priced into short-end interest rates, posing mild NZD downside risks.''