RBNZ meeting in focus
The kiwi has been in a subdued mood this month, indeed for several months, as the global reflation story plays out. Booming commodity prices have fallen back more recently and this seems to have affected NZD more than the other commodity-dollar currencies. NZD/USD has so far traded around 0.72 for the whole of this year, except for the moves above 0.74 in February and below 0.71 in March. Traders will look to this week’s RBNZ to possibly shake the pair out of its torpor.
Risks towards modest hawkish tilt?
While the RBNZ is expected to leave all policy settings unchanged and behave like most other major central banks (“above target inflation set to be temporary”), the balance of risks could point to a more optimistic outlook. However, this may in part be due to the dovish expectations already attached to this meeting where we get to see new economic forecasts.
Growth data has been weaker than expected but the labour market has remained robust and commodity prices across the time horizon have boosted the New Zealand terms of trade. But the economic outlook has improved on balance and with the recovery gaining traction, any hint of taper talk will be seized on by kiwi bulls.
NZD/USD long-term trend still higher
The trendline from the pandemic lows has held prices well this year with the dip below 0.70 to the year-to-date lows at 0.6943 in March being well supported by buyers. The pair is now close to that bullish trendline once again, tracking the 100-day moving average with the 50-day moving average just below. The mid-May lows also reside around here at 0.7135 with the month’s lows below at 0.7115 to act as further support. Any bullish hints by the RBNZ would see the pair bounce off the long-term trendline and see prices push up towards 0.73.