Are we expecting a rate hike from RBNZ?
The official cash rate report by the RBNZ (Reserve Bank of New Zealand) will be an event to watch out for on this week’s economic calendar. The forecast has it already that there is likely to be a rate hike by 25basis point to 0.50% from 0.25%. As we have it, the New Zealand economy has been on a strong recovery for the year 2021 with economic indicators clearly showing progress when compared to the pre-pandemic era. This clearly indicates that the economy is currently overheating, making it a reason we should likely expect a rate hike.
This will make New Zealand the first out of other countries to start implementing tightening policies as data clearly shows that inflation and employment numbers have reached the banks’ targets and are likely to go above. While this is a positive step from the RBNZ to control the pace at which the economy is moving, the NZD will likely benefit from the new development. However, the increasing number of Covid-19 cases could once again ground all economic activities. China, which the NZD is highly sensitive to has introduced tighter social restrictions as the latest Covid-19 outbreak has affected economic activities in one of the largest economies in the world.
Technical Outlook
NZDUSD 4 Hour time frame
Despite the economy showing resilience to the impact of the Covid-19 pandemic, NZD has performed poorly against the US dollar. Ever since Price dropped from 0.7460 which was the high of February 2021, the kiwi has failed to reach that high after making a recovery from 0.6940 which was support in March 2021. Currently, the price is trading within a range of 4hours time frame. With the RBNZ press conference in focus, we should expect either violation or respect of the technical levels.
Adegbotolu Kehinde Erastus – Market and Research Analyst
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