Early Wednesday at 01:00 GMT market sees the key monetary policy decision by the Reserve Bank of New Zealand (RBNZ) amid hopes of another hawkish play by the New Zealand central bank.

Despite the recently mixed data at home, not to forget China’s growth concerns, the RBNZ policymakers are likely bracing for a fourth rate hike, worth 50 basis points (bps) to 2.0%.

Although such a rate-hike is already priced-in, recent geopolitical tensions surrounding North Korea and Russia join some optimists calling for consecutive 50 basis points (bps) of a rate-lifts in the future to make today’s RBNZ Interest Rate Decision interesting for the NZD/USD traders.

Also in the publishing line are the economic projections and Governor Adrian Orr’s speech to watch.

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

A 50bp hike to 2% is widely expected, as the RBNZ seeks to get the OCR back to a more neutral level as soon as they can (their estimate at the February MPS was that neutral is around about 2%). Interest rate decisions will likely become more difficult over the second half of the year, especially as evidence of cooling demand starts to mount. As such, we anticipate they will return to more normal 25bp hikes as they assess how previous interest rate hikes are transmitting through the economy.

On the same line, analysts at Westpac said,

Westpac expects the RBNZ to hike the Official Cash Rate by another 50 basis points to 2.0% with a clear signal of further tightening to come. Its OCR forecast will be of particular interest.

Considering the market consensus, FXStreet’s Dhwani Mehta said,

The currency pair could witness a ‘sell the fact’ trading on an expected 50 bps hike with dovish forward guidance, as the RBNZ could be worried about hard-landing risks. In such a case, an extended correction towards May 20 lows of 0.6363 could be in the offing.

The market’s perception at the time of the policy announcement and the US dollar price action ahead of Wednesday’s FOMC Minutes could also affect NZD/USD’s reaction. 

How could it affect NZD/USD?

NZD/USD snaps a four-day uptrend by dropping back to mid-0.6400s ahead of the RBNZ. The Kiwi pair’s latest weakness could be linked to the US dollar’s rebound from the monthly low, as well as to the second-tier threats to the risk appetite.

That said, the RBNZ rate hike worth 50 bps is already priced-in as the NZD/USD prices keep the previous week’s recovery from a two-year low. Hence, an increase in the benchmark rate worth the estimations won’t make any major difference to the Kiwi pair trader until the accompanying economic forecasts portray a rosy picture of the Pacific economy, which is less anticipated due to the recently mixed statistics.

Hence, NZD/USD prices may provide a knee-jerk reaction to the RBNZ’s 50 bps rate hike but any disappointment, either via softer rate action or from the Rate Statement, will have larger repercussions.

Technically, NZD/USD justifies Tuesday’s pin bar with the recent losses, suggesting further pullback towards the 21-DMA support of 0.6394. However, any further downside will make the Kiwi pair vulnerable to testing the 0.6300 threshold. Meanwhile, the monthly high surrounding 0.6570 stays on the bull’s radar ahead of the RBNZ announcements.


NZD/USD Price Analysis: Bulls seeking a higher correction on weekly chart

New Zealand 10-year Treasury yields renew five-week low under 3.45% ahead of RBNZ 

NZD/USD can't catch a break ahead of the RBNZ

Reserve Bank of New Zealand Preview: Will they step up their tightening game?

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.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content

Recommended content

Editors’ Picks

EUR/USD rebounds, steadies above 1.0400

EUR/USD rebounds, steadies above 1.0400

EUR/USD has staged a rebound and reclaimed 1.0400 during the American trading hours on Friday with the US Dollar Index retreating from the multi-week high it set at above 105.60. Nevertheless, the pair remains on track to close the week in negative territory. 


GBP/USD climbs to 1.2050 area, looks to post weekly losses

GBP/USD climbs to 1.2050 area, looks to post weekly losses

GBP/USD reversed its direction and advanced to the 1.2050 area after having dropped to 1.1976 earlier in the day. The pair is still down more than 1% on the day with safe-haven flows dominating the financial markets following the disappointing PMI data from the US.


Gold rebounds above $1,800 as US yields fall sharply

Gold rebounds above $1,800 as US yields fall sharply

Gold has regained its traction and recovered above $1,800 after having slumped to a multi-month low below $1,790. Following the dismal PMI data from the US, the benchmark 10-year US Treasury bond yield is down more than 6% on the day, fueling XAU/USD's rebound.

Gold News

Why traders are rushing to exit positions on Cardano’s ADA price

Why traders are rushing to exit positions on Cardano’s ADA price

Cardano (ADA) price has had its performance review as the summer kicks off. ADA bulls are returning home with not-that-good a scorecard, and the underperformance could cut short holiday funding for the cryptocurrency.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!