Overnight, the Reserve Bank of New Zealand (RBNZ) claimed the spotlight.

The RBNZ left the Official Cash Rate (OCR) on hold at 5.50% for a fifth consecutive meeting, as widely expected by both economists at Bloomberg and markets (approximately a 25% chance of a rate hike priced in according to the OIS curve). However, as a note, there were some desks calling for a 25bp rate hike.

Nevertheless, the central bank tilted towards more of a dovish stance, signalling a terminal rate of 5.6% compared with November’s (2023) projections of 5.7%. This calmed the hawkish narrative and essentially helped put a lid on further policy firming. The last meeting at the end of November 2023 maintained hawkish language and was a surprise for markets; you may also recall that the RBNZ, unlike most global central banks who are on the doorstep of adopting an easing policy, communicated that if inflation were to come in hotter than expected, the central bank would likely need to tighten policy.

What was also interesting is that the RBNZ indicated that the OCR would need to remain in restrictive territory for some time; the latest bank projections reveal that rate cuts are not anticipated until mid-2025. The OIS curve, however, forecasts that the first 25bp cut could come as soon as October’s policy-setting meeting.

The New Zealand dollar (NZD) took a hit following the announcement, with the currency trading broadly lower against G10 peers in London this morning.

AUD/NZD Cross Bid from Support

The FP Markets Research Team also released a post on the potential for a bid from daily support at NZ$1.0587 on the AUD/NZD cross to test resistance from NZ$1.0673; as you can see, this did indeed occur. The Team also highlighted that the bid would likely be short-term given the technical evidence supporting sellers from the noted resistance.

NZD/USD: Further Downside?

The NZD/USD currency pair is down -1.2 % as of writing and is fast approaching major daily support coming in at $0.6052, a level accompanied by another more local support from $0.6062. Overall, there is limited technical evidence to suggest bears are going to slow down at current prices.

The latest move lower follows a rejection of resistance from $0.6209. Should the NZD continue to seek deeper waters and we engulf support around $0.6062ish, another layer of support can be found at $0.6009.

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