Hawkish RBNZ

The New Zealand Dollar has been in strong demand across the European morning today with the antipodean currency leading the pack currently. The moves come in response to the July RBNZ meeting held overnight which saw the bank taking a hawkish turn. Ahead of the meeting, expectations were somewhat mixed. Given that no forecasts or projections were due at this meeting, many were looking for little action and, instead, a signal of what might be on the table at the August meeting. However, the RBNZ caught markets off-guard as it announced an end to asset purchases, sending NZD soaring.

Asset Purchases To End

The RBNZ announced that it will end all asset purchases under its Large Scale Asset Purchase Program (LSAP) by Jul 23rd. Explaining the move, the RBNZ statement noted that “Members agreed that the major downside risks of deflation and high unemployment have receded.” The statement went on to say: “The committee agreed that a ‘least regrets’ policy now implied that the significant level of monetary support in place since mid-2020 could be reduced sooner.”

Market Looking For August Rate Hike

In the aftermath of the announcement, pricing for an RBNZ rate hike in August has shot up. The announcement today means that the RBNZ is now leading the pack in terms of RBNZ central bank policy normalisation. Ahead of the July meeting, traders had been looking at November as a potential lift off date for the bank, but this has now been moved forward, suggesting NZD is likely to stay supported in the near term.

In all, the meeting was a positive one. The RBNZ noted that the domestic economic performance has been better than previously forecast. Looking ahead the bank said that: “More persistent consumer price inflation pressure is expected to build over time due to rising domestic capacity pressures and growing labour shortages.”

Technical Views


The pair is starting to show signs of basing here. The recent block of consolidation along the .8631 level has seen plenty of bullish divergence on both RSI and MACD and with price now breaking above the bearish trend line from YTD highs as well as the .8751 level resistance, there is room for a further recovery with .8852 and .8990 the next upside targets to note.