November 24, 2022
  • November 24, 2022

RBNZ Rate Decision Snapshot: Fireworks for NZD / USD?

By on May 25, 2021 0

NZD / USD, RBNZ Price Analysis and News

  • RBNZ statement focused on NZD traders, expect forecast upgrades
  • Market positioning for a hawkish result

Today’s RBNZ monetary policy statement will be the primary focus for NZD traders. Since the central bank is expected to unanimously keep the cash rate at 0.25%, the primary focus will be on the attached statement and economic projections, in which the latter should be revalued. In addition, with the option of implicit flights on the 90e percentile in NZD / USD and AUD / NZD, we could be in for a decent sized reaction.

How To Trade Forex News: An Introduction

NZD IMPLIED MOVEMENT

Source: Refinitiv, DailyFX

New Zealand economy: Since the last MPS (February), New Zealand’s economy has been much more resilient than the RBNZ anticipated.

  1. The unemployment rate in the first quarter fell to 4.7%. As a reminder, the RBNZ assumed a 5.2% jump in 2021 and does not see 4.6% until the end of the forecast period.
  2. The Q1 CPI beat expectations at 1.5% (exp. 1.4%), but remained below the central bank‘s assumptions. That said, inflation expectations (2.05%) now sit in the middle of the RBNZ.
  3. Strong Q1 retail sales at 2.5% increase upside risks to Q1 GDP data.

With that in mind, the economic forecast should be revalued, which could see the timing of a rate hike postponed (keep an eye on the OCR forecast). If this were to happen, the NZD would likely see a first uprising, however, the RBNZ will remain cautious in its rhetoric, stressing that politics must remain very accommodating.

NZD positioning: As the meeting approaches, the markets appear to be tilting for a more belligerent outcome. This would have been stimulated by the RBNZ Ghost Board which sees a strong case for tightening in the coming year. Along with this, with both fast money (leveraged funds) and real money (asset managers) long NZD, asymmetric trading would be for a hawkish bummer compared to expectations. In this scenario, the NZD / USD would be vulnerable to a drop below 0.7150. However, if the RBNZ provides an optimistic valuation, expect 0.7250 to be the bulls’ target. Having said that, I remain bullish on the NZD against the AUD and would look to soften any AUD / NZD rally.

NZD / USD COT POSITIONING

RBNZ Rate Decision Snapshot: Fireworks for NZD / USD?

Source: Refinitiv, DailyFX

NZD RESPONSE TO RBNZ MEETING

RBNZ Rate Decision Snapshot: Fireworks for NZD / USD?

Source: BBG, DailyFX

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