Kiwi Plunges Despite Fresh RBNZ Rate Hike
NZD Heavily Sold
The New Zealand Dollar is in freefall today, despite the RBNZ hiking rates again overnight. The central bank raised rates from 2.5% to 2.75% as expected. However, traders appear to have bene caught offside by a less hawkish outlook from the RBNZ whose own forecasts project just one further hike this year against the 95bp worth of tightening seen in market pricing. NZD quickly fell as the RBNZ explained that further, gradual tightening at this point would help protect against the need for more aggressive tightening at a later date, again dampening traders' hawkish expectations.
Misaligned Expectations
Going into the meeting, market pricing reflected projections for roughly 1% more worth of tightening from the RBNZ by June 2027. However, the RBNZ’s own projections peg just .25% worth of tightening over the next three quarters, reflecting a heavy misalignment between the central bank and the market, explaining the concentrated sell off we’re seeing in NZD today. Looking ahead, NZDUSD is at risk of further downside into next week if Friday’s US labour market data shows any unexpected strength, putting focus back on near-term Fed tightening expectations.
Technical Views
NZDUSD
The reversal lower from .5987 is gathering pace with price now back inside the broken triangle pattern, testing below the .5853 mid-point also. Focus now is on the triangle lows and structural support around the .5774 level with bulls needing to defend that level to prevent a deeper drop towards .5690 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.