RBNZ Review Hawkish Orr strike fails to boost bird - NZDUSD

The Reserve Bank of New Zealand has today raised the Official Cash Rate by 50 basis points to 3%. It is the RBNZ’s fourth straight 50bp hike in a row, in a tightening cycle that started back in October.

The move was widely expected by economists. However, providing a hawkish surprise, the RBNZ’s OCR track was revised higher by 30bp to 3.7% by the end of the year. The terminal rate was revised higher to 4.10% vs 3.95% and the timing for the terminal rate to be reached, accelerated to Q2 2023 vs Q3 2022.

Throwing further hawkish fuel on the fire, the RBNZ added a new sentence to the statement's first paragraph that sums up the dilemma the back is faced with “Core consumer price inflation remains too high and labour resources remain scarce.”

The statement noted that inflation pressures had broadened, and measures of core inflation have increased. As a result, inflation is not expected to return “to the Committee’s 1-3 percent target range by the middle of 2024,” vs mid 2023 previously.

The RBNZ noted that higher interest rates were putting pressure on household spending and house prices which is of course what higher rates are expected to do.

“House prices have steadily dropped from high levels since November last year and are expected to keep falling over the coming year towards more sustainable levels.”

However, the RBNZ’s focus remains on inflation, and until the RBNZ sees firm evidence that inflation has turned lower, the RBNZ's rate hiking cycle will continue.

“Committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1-3 percent per annum target range. The Committee remains resolute in achieving the Monetary Policy Remit.”

Following the announcement, the NZD/USD rallied 40 pts from .6338/40 to .6383 before falling back to where it was going into the announcement.

There is a strong layer of medium-term support in the .6300/.6200c region, and we expect this level to hold if tested, looking for rotation higher to the June .6576 high.

Source Tradingview. The figures stated are as of August 17th ,2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.