NZD/USD drops to near 0.6100 as RBNZ opts to keep OCR unchanged

NZD/USD depreciates as the RBNZ keeps the Official Cash Rate (OCR) unchanged at 5.50% in its July meeting.
The New Zealand Dollar struggles after the release of soft Consumer Price Index data from close trading partner China.
The US Dollar appreciated after Fed’s Powell stated that a rate cut is not appropriate until the greater confidence of inflation slows down.

NZD/USD loses ground, trading around 0.6100 during Asian trading hours on Wednesday. This drop is driven by an interest rate decision by the Reserve Bank of New Zealand (RBNZ). RBNZ has opted to keep the Official Cash Rate (OCR) unchanged at 5.50% in its July monetary policy meeting, marking the eighth consecutive meeting with no change.

The New Zealand Dollar (NZD) faces pressure following the release of soft Consumer Price Index (CPI) data from China, a key trading partner. Chinese CPI rose 0.2% YoY in June, down from a 0.3% increase in May. Market expectations had projected a 0.4% increase for the period. Chinese CPI inflation fell by 0.2% month-over-month in June, compared to a 0.1% decline in May, which was below the anticipated 0.1% decrease.

The US Dollar (USD) received support after the Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the US Congress on Tuesday. Despite acknowledging improving inflation figures, the Fed remains firmly cautious. Powell answered questions before the Senate Banking Committee on the first day of his Congressional testimony on Tuesday.

Fed Chair Jerome Powell stated, "More good data would strengthen our confidence in inflation." Powell emphasized that a "policy rate cut is not appropriate until the Fed gains greater confidence that inflation is headed sustainably toward 2%." He also noted that "first-quarter data did not support the greater confidence in the inflation path that the Fed needs to cut rates."

Traders are anticipating the second semi-annual testimony by Fed Chair Jerome Powell, as well as speeches by the Fed’s Michelle Bowman and Austan Goolsbee. Additionally, attention will be on the US Consumer Price Index (CPI) data, set to be released on Thursday.

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.

Share: Feed news

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.