NZD/USD has been trading in a range since February, bouncing up and down in a 2.5 cent range. At the top of the range we have the 100 SMA (green) on the daily chart which has been acting as resistance despite being pierced once. Although the price returned back below it pretty fast, indicating that the range bound action would continue.

At the bottom of the range we have the 200 daily moving average (purple) and is currently positioned at 0.6220, suggesting a slight downward bias. Yesterday we saw a rejection at the 100 SMA ahead of the Reserve Bank of New Zealand (RBNZ) which showed hesitancy despite the planned rate hike.

The majority of economists surveyed expected a 25 basis point increase to the Official Cash Rate (OCR), pushing it to 5.50%. However, money markets indicate a 40% probability of a more aggressive 50 bps hike after the RBNZ surprised the market with a 50 basis point rate hike in the previous meeting.

Reserve Bank of New Zealand Rate Decision

• RBNZ raise its cash rate by 25bp to 5.25%
• Sees cash rate peak at 5.5%
• Sees March Q1 GDP at +0.3%
• Forecasts negative GDP growth for Q2, Q3 in 2023

• Sees official cash rate at 5.5% in September 2023 (pvs 5.43%)
• At 5.5% in June 2024 (pvs 5.5%)
• At 5.43% in September 2024 (pvs 5.44%)
• At 3.31% in June 2026
• Sees NZD TWI at around 71.5% in June 2024 (pvs 71.5%)
• Sees annual CPI 3.7% by June 2024 (pvs 3.6%)

From the Statement:

• Official Cash Rate set to remain restrictive
• The Committee agreed the level of interest rates are constraining spending and inflation pressure.
• The OCR will need to remain at a restrictive level for the foreseeable future, to ensure that consumer price inflation returns to the 1-3% annual target range, while supporting maximum sustainable employment.
• Global economic growth remains weak and inflation pressures are easing. This follows a period of significant monetary policy tightening by central banks internationally.
• International supply chain constraints have also eased following a period of disruption, and shipping costs have declined.
• The weaker global growth has led to lower export prices for New Zealand’s goods.
• In New Zealand, inflation is expected to continue to decline from its peak and with it measures of inflation expectations. However, core inflation pressures will remain until capacity constraints ease further.
• While employment is above its maximum sustainable level, there are now signs of labour shortages easing and vacancies declining.
• Consumer spending growth has eased and residential construction activity has declined, while house prices have returned to more sustainable levels. More generally, businesses are reporting slower demand for their goods and services, and weak investment intentions. Businesses report that a lack of demand, rather than labour shortages, is now the main constraint on activity.
• There has been a return of net inward migration since international borders reopened. The Committee expects the pace of immigration to ease back toward pre-COVID-19 trend levels over coming quarters. While immigration has assisted to ease labour shortages, its net impact on overall spending is uncertain.
• The recent recovery in tourism spending, to around three-quarters of its pre-COVID-19 trend level, is also supporting demand.
• The repair and rebuild facing significant regions of the North Island – due to the recent severe weather events – will support economic activity, in particular the horizontal construction sector. The timing of this predominantly government investment will be spread over several years. Broader government spending is anticipated to decline in inflation-adjusted

NZD/USD Live Chart