NZD/USD tumbles despite RBNZ hike
NZD/USD started the day with gains but has reversed directions and is sharply lower in the North American session. The New Zealand dollar is trading at 0.5657, down 1.38%.
As expected, the Reserve Bank of New Zealand delivered a 0.50% hike, bringing the benchmark to 3.50%, its highest level since 2015. The RBNZ has now hiked rates at eight consecutive meetings and even discussed a super-size 0.75% increase at today's meeting.
The RBNZ has been aggressive with its rate-tightening cycle, and there's likely more to come. The rate statement noted that "core consumer inflation is too high" and the labour market remains tight, a signal that the central bank will continue to tighten until inflation has peaked. This means that the November meeting will likely bring a rate hike of 0.50% or 0.25%, depending on economic data and the inflation picture. Inflation hit 7.3% in Q2, up from 6.9 in Q1.
One of the dangers of a steep rate-tightening cycle is choking off economic growth and Moody's rating agency said after today's rate hike that a soft land was "increasingly unlikely". The RBNZ might disagree, pointing to a 1.7% gain in GDP in Q2 and a robust labour market. The economy has proven strong enough to bear sharp rate hikes and Governor Orr is looking for a peak in inflation before easing up on rates.
September was a disaster for the New Zealand dollar, which plunged a staggering 8.5% and fell to its lowest level since March 2020. NZD/USD has rebounded 2.0% in October, but the currency faces significant headwinds. The escalating conflict in Ukraine, which has seen President Putin annex 15% of Ukrainian territory, and a hawkish Federal Reserve are likely to continue weighing on the New Zealand dollar in the short term.
NZD/USD is testing support at 0.5712. Below, there is weak support at 0.5639, followed by 0.5522
There is resistance at 0.5829 and 0.5902
As expected, the Reserve Bank of New Zealand delivered a 0.50% hike, bringing the benchmark to 3.50%, its highest level since 2015. The RBNZ has now hiked rates at eight consecutive meetings and even discussed a super-size 0.75% increase at today's meeting.
The RBNZ has been aggressive with its rate-tightening cycle, and there's likely more to come. The rate statement noted that "core consumer inflation is too high" and the labour market remains tight, a signal that the central bank will continue to tighten until inflation has peaked. This means that the November meeting will likely bring a rate hike of 0.50% or 0.25%, depending on economic data and the inflation picture. Inflation hit 7.3% in Q2, up from 6.9 in Q1.
One of the dangers of a steep rate-tightening cycle is choking off economic growth and Moody's rating agency said after today's rate hike that a soft land was "increasingly unlikely". The RBNZ might disagree, pointing to a 1.7% gain in GDP in Q2 and a robust labour market. The economy has proven strong enough to bear sharp rate hikes and Governor Orr is looking for a peak in inflation before easing up on rates.
September was a disaster for the New Zealand dollar, which plunged a staggering 8.5% and fell to its lowest level since March 2020. NZD/USD has rebounded 2.0% in October, but the currency faces significant headwinds. The escalating conflict in Ukraine, which has seen President Putin annex 15% of Ukrainian territory, and a hawkish Federal Reserve are likely to continue weighing on the New Zealand dollar in the short term.
NZD/USD is testing support at 0.5712. Below, there is weak support at 0.5639, followed by 0.5522
There is resistance at 0.5829 and 0.5902
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