Giles Coghlan LLB, Lth, MA
Financial Source
On February 22 at 01:00 GMT, the RBNZ will announce its interest rate decision. At the last meeting, the RBNZ took a very hawkish tone as it recognised that annual inflation was too elevated at 7.2%. This was the reason it hiked by 75 bps up to 4.25%. The question now is how will it respond at the next meeting?
Headline inflation remains elevated at 7.2% for January, but there are some signs of topping here. There was also some good news in that the 7.2% print was actually below the 7.7% that was actually forecast.
The main point to take from the RBNZ is that it is more fully focused on tackling inflation and a very hawkish bias has kept buyers propping up the NZD index from the 80.00 index level marked on the chart below.
RBNZ vs STIR markets
At the meeting last year, the RBNZ expected interest rates to reach a high of 5.5% in Q3 2023 which is up from the prior reading of 4.1% that was expected. STIR markets see a slight lower terminal rate of 5.30% which reflects the weaker labour data on January 31st and falling food inflation on February 13 down to 10.3% from 11.5% forecast.
The takeaway
The markets expect a 50bps hike, so if it hikes by only 25bps then expect an immediate upside in AUDNZD. If it hikes by 50bps and remains concerned about inflation that is only the base case. However, if it revises projections for future hikes even higher and/or hikes by 75bps expect immediate downside in AUDNZD. Note the key trend line on the monthly chart that can be used as a reference point.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
Gold trades near record-high, stays within a touching distance of $3,100
Gold clings to daily gains and trades near the record-high it set above $3,080 earlier in the day. Although the data from the US showed that core PCE inflation rose at a stronger pace than expected in February, it failed to boost the USD.
EUR/USD turns positive above 1.0800
The loss of momentum in the US Dollar allows some recovery in the risk-associated universe on Friday, encouraging EUR/USD to regain the 1.0800 barrier and beyond, or daily tops.
GBP/USD picks up pace and retests 1.2960
GBP/USD now capitalises on the Greenback's knee-jerk and advances to the area of daily peaks in the 1.2960-1.2970 band, helped at the same time by auspicious results from UK Retail Sales.
Donald Trump’s tariff policies set to increase market uncertainty and risk-off sentiment
US President Donald Trump’s tariff policies are expected to escalate market uncertainty and risk-off sentiment, with the Kobeissi Letter’s post on X this week cautioning that while markets may view the April 2 tariffs as the "end of uncertainty," it anticipates increased volatility.
US: Trump's 'Liberation day' – What to expect?
Trump has so far enacted tariff changes that have lifted the trade-weighted average tariff rate on all US imports by around 5.5-6.0%-points. While re-rerouting of trade will decrease the effectiveness of tariffs over time, the current level is already close to the highest since the second world war.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.