When is the RBNZ and how could it affect NZD/USD?

RBNZ interest rate decision overview

The Reserve Bank of New Zealand is today at 21.00 GMT and are expected to hold the OCR at 1.75%. However, the consensus is that there could be a hint of hawkishness around the event. 

There will be the usual statement accompanied by its quarterly Monetary Policy Statement (MPS)  that will set out how the Reserve Bank proposes to achieve its targets; how it proposes to formulate and implement monetary policy during the next five years; and how monetary policy has been implemented since the last Monetary Policy Statement. There will also be a press conference, so plenty here to keep NZD traders glued to the screens. 

Stephen Toplis, Head of Research at BNZ, suggests that there is no excuse for the RBNZ cash rate to be just 1.75% in New Zealand, but odds are the Reserve Bank will find one when it delivers its May 11, Monetary Policy Statement, simply because they said they would. "When it released its March OCR review, the Bank reaffirmed that not only did it expect interest rates to stay where they were for the foreseeable future but it went on to reiterate that it thought there was equal chance that the next move could be a cut as a hike. To hike this week would leave the Bank with egg splattered all over its face, a prospect it couldn’t abide.”

How could affect NZD/USD?

A surprise either way could be a very dramatic event for the forex space. A rate hike would drive the kiwi higher with the bullish trend formed from 0.6838 lows, leaving the 10 DMA for dust at 0.6902 and have the potential for 0.7050 and a break of the 200-d ema at 0.7046 on a spike. A continuation would open scope for 0.7120. Should the bank do as expected and hold while confirming all of the positives in the economy and inflation close to the 2% target, any hawkish hints that a rate hike could be on the table before, say Feb of next year, demand for the bird on the knee-jerk could drive the price onto the 0.70 handle o a break of recent highs at 0.6952. However, some of that outcome is evidently priced already. If the RBNZ comment again that the next move could just as well be a rate cut, the bird could drop to test the 0.6840/60/80 2017 supporting levels.

Key Notes

• RBNZ to hold the OCR at 1.75% - Westpac
• RBNZ: Buy fresh kiwis – Deutsche Bank
• RBNZ will sit pat this week – BNZ

About the RBNZ Interest Rate Decision

RBNZ Interest Rate Decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the NZD.