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

Early Wednesday at 02:00 GMT market sees the monetary policy decision by the Reserve Bank of New Zealand (RBNZ). New Zealand’s central bank is at the crucial point where it needs to strike a balance between economic optimism at home and the reflation fears.

It should be noted that Governor Adrian Orr and the company have repeatedly signaled their intention to keep monetary policy stable and turned down rate-hike fears off-late.

Market consensus favors no change in the benchmark interest rate, currently at 0.25%, or the Large Scale Asset Purchases (LSAP) during today’s monetary policy meeting. However, the economic forecast and the way out of easy money, amid rumors of future tightening, will be closely watched for near-term direction.

Ahead of the event, Australia and New Zealand Banking Group (ANZ) said,

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. There are new upside (trans-Tasman travel bubble) and downside (housing tax changes) to the outlook, but we expect the RBNZ to steer a steady path through the middle. We expect the RBNZ to leave both their policy levers and their ‘wait and see’ tone unchanged – reiterating that easy policy will be required for a long time yet, and that they have the ability to add more stimulus if required, but not suggesting that they expect to have to do so.

Also joining the bears’ league is TD Securities that said,

We expect the RBNZ to keep all policy settings unchanged at the March MPR meeting and see no reason for the Bank to deviate from its message that "considerable time and patience" will be required to meet its inflation and employment objectives. The positive news is the pick in global economic activity and the Trans-Tasman bubble reopening well before 2022 while the negatives are the unsteady global vaccine roll-out, weaker than expected economic activity and changes to NZ housing. We expect the Bank to see through rising price pressures. The statement should be at worst neutral and at best dovish.

How could it affect NZD/USD?

NZD/USD extends the previous day’s run-up while taking the bids around 0.7065, up 0.13% intraday, amid the initial Asian session on Wednesday. In doing so, the quote cheers the broad US dollar weakness even as the covid vaccine woes test the bulls. As today’s RBNZ is less likely to offer any surprise, the kiwi pair may extend its upside break of 21-day SMA towards 0.7095–8000 zone comprising lows marked in January and early March.

Ahead of the release, FXStreet’s Valeria Bednarik says, “The market is heading into the meeting with little hopes for action, but excited about possible hints on what’s next for the RBNZ. Would policymakers remain “patient,” or will they be more optimistic?”

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About the RBNZ interest rate decision and rate statement

The 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 raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.