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RBNZ Monetary Policy: Will the NZD/USD Keep Rising?

The NZDUSD currency pair has had a rough few years, experiencing annual declines in 2021 (-5.05%), 2022 (-6.93%),and 2023 (-0.45%). So far in 2024, it's down over 2.85%, reaching its lowest point since November 2023 (0.58515) in April. However, there are signs of a potential turnaround. In recent months, the NZDUSD has climbed over 4.19%. Could this be the start of a sustained upward trajectory? Several factors hint at a potential turnaround. Speculation swirls about a U.S. rate cut as early as September 2024, potentially weakening the USD. Additionally, hawkish comments from the Reserve Bank of New Zealand (RBNZ) are somewhat strengthening the NZD, as the RBNZ doesn’t seem ready to cut interest rates.. If you’re trading the NZDUSD, you might be wondering if the FX pair can maintain its upward momentum? What should you monitor during the RBNZ’s upcoming meeting? And what other developments should traders keep an eye on? The RBNZ is Expected to Maintain its Rate At 5.5% on Wednesday 10th of July All 20 economists surveyed by Bloomberg expect the Reserve Bank of New Zealand (RBNZ) to maintain the Official Cash Rate (OCR) at 5.5% for the eighth consecutive meeting on Wednesday. This decision comes despite growing market speculation of a rate cut before the end of 2024, fueled by a weakening economy. New Zealand's economic performance in the first quarter of 2024 offered a glimmer of hope after a worrying slump. The GDP grew by 0.2% quarter-on-quarter, exceeding market expectations of stagnation and bouncing back from a 0.1% contraction in the previous quarter. However, this small expansion comes after two consecutive quarters of negative growth, officially plunging New Zealand into a technical recession for the second time within 18 months despite a strong population growth observed recently.

This fragile recovery is further clouded by persistent high inflation. As measured by the Consumer Price Index (CPI), inflation in New Zealand surged 4% year-on-year for the quarter ending March 2024, following a 4.7% increase in December 2023. This significantly exceeds the Reserve Bank of New Zealand's (RBNZ) target inflation range of 1 to 3% over the medium term. The combined weight of recession and inflation creates a significant challenge for the Reserve Bank of New Zealand. Traditionally, central banks raise interest rates to combat inflation, but such actions can also dampen economic growth too much, which could also be a significant factor for central bankers. Conversely, lowering interest rates can stimulate the economy but could exacerbate inflationary pressures. In their May meeting, the Reserve Bank of New Zealand projected delaying any potential rate cuts until the third quarter of 2025. Additionally, they even considered raising the OCR further to combat persistent domestic inflation pressures. While the RBNZ is expected to maintain a hawkish stance, the economic slowdown could prompt them to signal a potential shift in policy direction in the coming months. Traders will be closely watching the RBNZ's statement for any hints about future rate cuts. Where Might the NZDUSD Be Heading?

Daily Chart NZD/USD - Source: 100% Online Platform ActivTrader On the above chart of the NZD/USD currency pair, prices have been trading upwards for the last week. A few days ago, they broke above the green Ichimoku cloud with a strong bullish Relative Strength Index (RSI) that bounced back from its neutral level of 50. If prices keep moving upwards and above the Ichimoku cloud, they might head towards previous highs and important resistance levels such as around 0.61982 and 0.62719. On the other hand, if prices move back downwards inside the cloud, the next support levels to monitor would be the 0.60387 and 0.59870. Statistics and Data That Could Influence the NZDUSD This Week Tuesday 9th of July ●02:00 PM: American Fed Chair Powell Testimony Wednesday 10th of July ●02:00 AM: NZ RBNZ Interest Rate Decision ●10:45 PM: NZ Food Inflation YoY Thursday 11th of July ●12:30 PM: American Inflation Rate YoY ●10:30 PM: NZ Business PMI Friday 12th of July ●12:30 PM: American PPI MoM ●02:00 PM: American Michigan Consumer Sentiment Prel

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Publication date:

2024-07-10 11:08:53 (GMT)

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