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

Early Wednesday at 01:00 GMT market sees the monetary policy decision by the Reserve Bank of New Zealand (RBNZ). With the surprise negative from the Delta covid variant outbreak in New Zealand (NZ) challenging the anticipated RBNZ rate hike, today’s meeting becomes the key for the NZD/USD traders.

It’s worth noting that the local lockdowns also challenge the RBNZ to become the first major central bank to announce a rate hike and overcome the pandemic-led woes.

Even so, upbeat price pressure, especially in the housing market, joins firmer jobs report to portray a market consensus suggesting a 0.25% hike in the benchmark interest rate, currently at 0.25%, but no major adjustments to the Large Scale Asset Purchases (LSAP) during today’s monetary policy meeting. The forward guidance, however, will be the key as some on the floor expect a negative surprise.

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

We think the least regret for the RBNZ is still to stabilize the economy by gradually lifting the OCR, but need to be prepared to pause or even reverse course should downside risks eventuate.

Also joining the bull’s league is Westpac that said,

Westpac expects the RBNZ to lift its official cash rate by 25bps to 0.50% and to endorse the path of future rate hikes that was projected in its August Monetary Policy Statement. This would be in line with current market pricing. The RBNZ was clearly poised to raise rates in August, until a fresh Covid-19 outbreak and a move back into lockdown just a day before the decision. However, it’s likely that this will only constitute a delay to the RBNZ’s plans. Experience has shown that demand tends to rebound rapidly once Covid restrictions are lifted. When that happens, the RBNZ will be back to facing the same situation as before – strong demand running up against cost pressures and capacity constraints.

How could it affect NZD/USD?

NZD/USD remains mildly offered near intraday low surrounding 0.6950 ahead of the key RBNZ interest rate decision. The kiwi pair might have taken clues from the downbeat print of S&P 500 Future amid fears of a delay in the US stimulus and debt-limit extension even as US President Joe Biden shows readiness to get it passed soon.

Also, the latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER) and the virus conditions in Auckland add to the challenges for the RBNZ hawks and probe NZD/USD bulls by the press time.

Given the wide expectations of an RBNZ rate hike, backed by upbeat employment and inflation data, NZD/USD bulls may cheer the positive outcome towards clearing the 0.7010 hurdle. However, the market reaction to the negative surprise will be louder.

Technically, NZD/USD buyers face rejection around 0.6975, comprising 10-DMA, on the way to the 0.7010 key resistance, including 50-DMA and a three-week-old descending resistance line. This hints at a pullback towards a horizontal area encompassing multiple levels marked since June between 0.6925 and 0.6915.

Keynotes

NZD/USD braces for 0.7010 key hurdle with eyes on RBNZ

Reserve Bank of New Zealand Preview: Set for the first lift-off since the pandemic

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.