NZD under pressure following dovish RBNZ statement

Daily Currency Update

The New Zealand dollar fell through trade on Thursday as markets responded to the RBNZ latest monetary policy update. As expected, policymakers raised rates by 50 basis points, lifting the official cash rate to 1.5%. Markets quickly sent the NZD toward intraday highs at 0.69 before correcting and forcing the NZD lower as the RBNZ delivered a dovish post MPR statement. Policymakers highlighted the larger rate hike was simply a bringing forward of the tightening cycle in a bid to control inflation and not a broader correction in neutral rate expectations. Leading into the policy announcement markets has priced in a cash rate of 4.2% for the end of this hiking cycle. The RBNZ made clear that it expects the OCR to peak around 3%. The market was forced to pare expectations for NZ interest rates driving NZ bond rates and the currency downward. Having broken 0.68, the NZD touched intraday lows at 0.6775 before edging higher into this morning’s open. The NZD currently buys 0.6796 US cents and sits only marginally off an 18-month low against the AUD at 0.9117.

Moving into the Easter long weekend our attentions turn now to the ECB policy meeting and a slew of US data points for direction.

Please note: There will be no commentary over the Easter holiday period. Daily commentary will return on Tuesday the 19th of April.