NZD/USD surges briefly after RBNZ hikes by 50 basis points

The New Zealand dollar is showing sharp movement on Wednesday after the Reserve Bank of New Zealand shocked the markets and raised rates by 50 basis points. In the US, JOLTS Jobs Openings was below expectations, raising concerns about the strength of the US labour market.

In the European session, NZD/USD is trading at 0.6296, down 0.24%.

RBNZ stuns markets with oversize hike

The RBNZ gets the prize for shocker of the week, after the central bank delivered a 50-bp hike, bringing the benchmark cash rate to 5.25%. Most analysts were expecting a modest 25-bp increase and ahead of the decision, the markets had priced in such a move at a massive 86%. The New Zealand dollar climbed over 1% following the decision, but has pared all of the gains and fallen into negative territory.

The RBNZ statement noted that inflation remains too high, and there’s no arguing that point, as CPI was unchanged in the fourth quarter at 7.2%. The reason that the markets were completely blindsided was that the economy is sputtering. GDP declined by 0.6% in the fourth quarter. The uncertain global outlook doesn’t bode well for the export-dependent economy, and high interest rates and red-hot inflation are hurting domestic demand. This writer suggested yesterday that it seemed a sensible time for the RBNZ to take a breather, but instead, the Bank pushed the rate pedal down even harder than expected.

In the US, a soft JOLTS Job Openings release has the markets abuzz about the strength of the US labour market. JOLTS slipped to 9.93 million, down from 10.56 million and its lowest level since May 2021. The nonfarm payrolls report on Friday will have added significance, as a soft reading would put pressure on the Fed to take a pause at its meeting in May.

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NZD/USD Technical

• NZD/USD tested resistance at 0.6362 earlier. Above, there is resistance at 0.6425
• 0.6308 and 0.6245 are providing support

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