Kiwi Tumbles After RBNZ Holds Rates
London: 28 February 2024 (TraderMade): The New Zealand Dollar (NZD) is facing significant selling pressure today as the central bank (Reserve Bank of New Zealand - RBNZ) surprised markets by holding interest rates steady at 5.5%.
Key Takeaways: NZD Tumbles After RBNZ Holds Rates
- RBNZ surprises markets by holding interest rates steady at 5.5%.
- Central bank lowers peak cash rate forecast to 5.6%, down from 5.7%.
- NZD weakens against USD, reaching a one-week low of $0.61110.
- NZDUSD pair experienced a volatile week with a limited range and a slight downward trend.
- Analysts are watching 0.61 as a potential support level for NZD.
- The future direction of NZD is uncertain, dependent on market sentiment and upcoming data.
RBNZ Holds Rates, Catches Markets Off-Guard
The RBNZ's decision to maintain the cash rate at its February meeting defied market expectations, which were anticipating a hike. This unexpected move from the central bank suggests a shift in its monetary policy stance, potentially due to concerns about balancing inflation and economic growth.
Analysts believe the RBNZ might be re-evaluating its tightening cycle in light of recent economic data or potential risks to the growth outlook.
Lower Peak Rate Forecast Adds to Dovish Sentiment
Not only did the RBNZ hold rates, but they also revised their forecast for the decline of the peak cash rate. Previously, the central bank projected the peak to be 5.7%. Yet they adjusted the rate to 5.6%.
This revision reinforces the dovish shift in the RBNZ's stance, signaling a potential slowdown in their interest rate hikes.
NZDUSD Loses Momentum Despite Week-Long Range Trade
The New Zealand Dollar (NZD) against the US Dollar (USD) experienced a volatile week with no clear directional bias over the last six trading days, ending 28 February 2024, at 0.61058.
Key observations
- Limited range: While the NZDUSD pair witnessed daily fluctuations, the overall movement remained within a tight range, with a weekly high of 0.62181 and a low of 0.61009.
- Slight downward trend: Despite the range-bound trading, the NZD closed the week lower than it began, reflecting a modest depreciation of 1.23% compared to the opening price of 0.62334 on 21 February.
- Volatility spikes: The NZDUSD pair experienced increased volatility on Wednesday, 28 February, following the Reserve Bank of New Zealand's (RBNZ) decision to hold interest rates steady. This decision surprised markets, leading to a sharp decline in the NZD before it partially recovered later in the day.
Overall, the NZDUSD trajectory over the last week suggests a period of cautious trading with conflicting forces at play. While the RBNZ's decision initially weakened the NZD, it's crucial to monitor upcoming economic data and global market sentiment to determine the future direction of the pair.
NZD Slides, Eyes Support Levels for Direction
- As a direct consequence of the RBNZ's decision, the NZD has plunged against the US dollar (USD).
- Following the announcement, the NZD lost roughly 1% of its value, reaching its lowest level since 16 February at $0.61110.
- Analysts are now keenly watching the 0.61 level, which holds significant psychological importance for the NZD.
Looking Ahead
While the immediate future of the NZD remains uncertain, traders will closely monitor key support levels and technical indicators for further clues on its direction. The overall market sentiment and upcoming economic data releases, such as European inflation reports, could also affect the NZD's performance in the coming days.
