Forex Market: NZD/USD hits 1 1/2-week high after RBNZ delivers 50 basis point rate hike

NZD/USD briefly touched a fresh 1 1/2-week high on Wednesday, after the Reserve Bank of New Zealand lifted its official cash rate by 50 basis points to 3.5%, a level unseen since April 2015, at its October meeting.

This has been the fifth consecutive 50 basis point hike.

RBNZ policy makers considered core CPI inflation as still too high, while the meeting minutes revealed bank officials even debated whether to raise interest rates by 75 basis points.

The RBNZ Board said that more rate hikes would be delivered and also noted there were lags in monetary policy transmission.

The Board also said third-quarter economic activity in New Zealand might have been slightly stronger than previously expected, as consumption remained resilient despite that spending on durable goods continued to decrease.

“Just as RBA’s smaller-than-expected hike yesterday added to trimming of hawkish Fed bets, RBNZ’s hawkish signalling could remind markets that fighting inflation is still priority for many central banks,” Maybank analyst Saktiandi Supaat was quoted as saying by Reuters.

“A more synchronous dovish tilt among major central banks on growth fears might be premature.”

Markets are now pricing in over 60% chance of another 50 basis point rate hike by the RBNZ in November, while interest rates are seen peaking at 4.5% by May 2023.

As of 9:14 GMT on Wednesday NZD/USD was edging up 0.16% to trade at 0.5739. Earlier today, the major Forex pair went up as high as 0.5805, which has been its strongest level since September 23rd (0.5856).

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.5723
R1 – 0.5766
R2 – 0.5801
R3 – 0.5844
R4 – 0.5887

S1 – 0.5687
S2 – 0.5644
S3 – 0.5608
S4 – 0.5572