The New Zealand dollar is paddling in calm waters, as NZD/USD trades close to 1-month lows. In the European session, NZD/USD is trading at 0.6176, up 0.10%. The kiwi is still smarting from a disastrous week, in which NZD/USD plunged 4.40%.
RBNZ coy on its plans
The RBNZ is in the midst of an aggressive rate-hike cycle, having raised rates by 50 basis points for a fourth consecutive time. The central bank is expected to add another 50bp hike at the October meeting, which would bring the cash rate to 3.50%. Inflation has hit 7.3%, but the RBNZ is confident that it will peak soon and expects inflation to fall to 3.8% by the end of 2023. The central bank is cautiously positive about the economic outlook, predicting that the economic downturn will not turn into a recession.
Deputy Governor Christian Hawkesby said in an interview this week that the slowdown should lower inflation and bring employment to a more “sustainable level”. Hawkesby said that the RBNZ was deliberately being ambiguous about the peak for rate levels, saying it could be at 4.00% or 4.25% or thereabouts. He added that more rate hikes are coming, while acknowledging that the pace of tightening could slow in the near future.
We’ll get a look at some key US events today and Wednesday that could have an impact on the direction of the US dollar. New Home Sales will be released later today, with a forecast of 575 thousand for July, following 590 thousand in June. Durable goods orders will be published on Wednesday, with the headline reading expected to slow to 0.6% in July, down sharply from 2.0% in June. With the Federal Reserve saying that rate policy will depend to a large extent on the strength of economic data, investors are keeping a close eye on key US events and we could see some movement in the currency markets following these releases.
- NZD/USD faces resistance at 0.6227 and 0.6366
- There is support at 0.6126 and 0.6075
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.