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NZD/USD jumps after another massive RBNZ rate hike

The NZD traded higher today, supported by the hawkish RBNZ decision and a generally weaker greenback.

The so-called Kiwi traded half a percent higher during the EU session on Wednesday as traders digested today’s hawkish RBNZ monetary policy decision.

RBNZ hikes rates to the highest level since 2008

The Official Cash Rate (OCR) of the Reserve Bank of New Zealand (RBNZ) was increased by 75 basis points (bps) earlier today. This time, the RBNZ has abandoned the 50 basis point rate hike regime in favor of a substantially larger increase and hiked the OCR to 4.25%.

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Governor Adrian Orr of the RBNZ made a decision that was consistent with expectations. During its quarterly economic predictions, the RBNZ increased its expectations for inflation and suggested a peak Official Cash Rate of 5.5% rather than the most recent estimate of 4.25%.

Due to an unprecedented rise in inflationary pressures, the New Zealand economy is having problems. The third-quarter inflation rate of 7.2% was mostly driven by sharp increases in service prices.

According to Paul Conway, chief economist of the RBNZ, “inflation forecasts are greater than predicted.”

According to a different RBNZ official, the neutral interest rate has gone up, and the current state of the economy is not as contractionary.

We’re talking about a two to three-quarters recession, according to Karen Silk, an RBNZ policymaker.

Focus on US data and the Fed

Later today, the Durable Goods Orders and New Home Sales statistics for October, weekly Initial Jobless Claims, and the Consumer Sentiment Survey from the University of Michigan will also be included on the US economic agenda. Before the Thanksgiving break, the US Federal Reserve will release the minutes of the October policy meeting.

Additionally, recent hawkish comments from a number of Fed officials indicate that the US central bank is still far from stopping its cycle of rate hikes. A further factor that supports the US dollar and helps to restrict the NZD/USD pair is a little increase in US Treasury bond rates.

Short-term chart appears bullish

The short-term uptrend line remains intact, with today’s decline stopping right there. As long as the price trades above the support line, currently near 0.6140, the short-term outlook seems bullish.

You can also read: US markets closed on a positive note

In that scenario, bulls should target last week’s highs of 0.6205. On the downside, a failure to defend 0.6140 might lead to a decline toward this week’s lows at 0.6090.

NZDUSD 30m chart, Source: Author´s analysis, tradingview.com

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