When is the RBNZ Interest Rate Decision and how it could affect NZD/USD?

Early Wednesday at 02:00 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 doves flexing muscles of late.

RBNZ is up for fueling the market moves with its 11^th consecutive rate hike, expectedly worth 0.25%, during early Wednesday. The Interest Rate Decision will be accompanied by the RBNZ Rate Statement which can provide further details on the central bank’s next moves, making it crucial for the NZD/USD pair traders to watch.

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

We expect the RBNZ will raise the OCR 25 bps to 5.00%. If that’s not to be, we see a 50 bps hike as likelier than a pause. On balance, local data since the February MPS has not convincingly tilted things in either direction. But global financial sector wobbles suggest a degree of caution is appropriate, which the RBNZ can now afford given they are fairly confident the OCR is now in contractionary territory. We continue to forecast the OCR to peak at 5.25% with one more hike to come in May.

On the same line, analysts at the National Australia Bank (NAB) said,

We think the RBNZ/MPC will largely hold to its February MPS line, by delivering a 25 bps hike in the OCR and maintaining a hawkish tilt in its commentary and minutes.

Furthermore, FXStreet’s Dhwani Mehta said,

With a 25 bps rate hike almost a done deal, traders will closely scrutinize any tweaks in the language of the statement for fresh hints on the RBNZ’s rate hike path.

How could it affect NZD/USD?

NZD/USD retreats from a seven-week high while portraying the pre-RBNZ consolidation around 0.6310 by the press time. The Kiwi pair’s latest pullback could also be linked to the corrective bounce in the US Treasury bond yields and the US Dollar after refreshing the multi-day low.

Earlier in the week, the RBNZ Shadow board backed the market expectations of witnessing a 0.25% rate hike but also mentioned the strain on demand the central bank’s rate hike offers. As a result, the Reserve Bank of New Zealand may announce a dovish hike to defend the policymakers from criticism.

Given the clear early signals of witnessing a 0.25% rate hike, the NZD/USD appears well-set to consolidate the latest pullback around the seven-week high. However, a negative surprise due to the natural calamity at home won’t hesitate to drown the Kiwi pair.

Apart from the interest rates, the economic forecasts and language of the RBNZ Rate Statement will also be the key for the NZD/USD pair traders to watch. That said, the bleak economic outlook and early signals for peak rates might tease the sellers despite the 0.25% rate hike announcement.

Technically, NZD/USD justifies the previous day’s upside break of the 100-DMA and a five-week-old ascending trend line, around 0.6300, to aim for the 61.8% Fibonacci retracement level of its February-March fall, around 0.6365.

Keynotes

RBNZ Interest Rate Decision Preview: Hawkish guidance yet again? 

NZD/USD traders await the RBNZ

NZD/USD Price Analysis: Renews seven-week high above 0.6300 as RBNZ Interest Rate Decision looms

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 explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.