NZD/USD gushes lower after hawkish RBNZ decision

The NZD/USD price declined even after the relatively hawkish Reserve Bank of New Zealand (RBNZ) interest rate decision. The pair declined to 0.6912, which was the lowest level since October 13th. 

RBNZ decision

New Zealand’s economy has done relatively well in the past few months. Recent data shows that the labour market has tightened and moved to pre-pandemic levels. Retail sales have done well while other parts of the economy have recovered as well. Inflation has also risen because of higher energy prices and the ongoing shipping challenges. 

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It is against this backdrop that the RBNZ held its monetary policy meeting. In a statement on Monday morning, the committee announced that it will hike interest rates by another 0.25% to 0.75%. That was the second rate hike this year. It makes the RBNZ one of the most hawkish central banks in the market. In a statement, the bank said:

“Headline CPI inflation is expected to measure above 5 per cent in the near term before returning towards the 2 per cent midpoint over the next two years. The near-term rise in inflation is accentuated by higher oil prices, rising transport costs and the impact of supply shortfalls.”

The NZD/USD pair declined after the hawkish decision because the rate hike was in line with expectations. This means that investors had already priced in the country’s rate hike. 

It also declined because of the Federal Reserve. Analysts expect that the Fed will start being more aggressive in a bid to tame consumer and producer inflation. Later today, the NZDUSD will react to the latest US GDP, durable goods orders and personal consumption expenditure (PCE) data.

NZD/USD forecast

The three-hour chart shows that the NZD/USD pair has been in a strong bearish trend in the past few weeks. It has fallen by more than 4% from its highest level in October. As a result, the pair has moved below the Ichimoku cloud and the 25-day moving average. The pair has also moved close to the lower line of the descending channel while the MACD has continued falling. Therefore, the path of the least resistance for the pair is lower, with the next key level to watch being at 0.6860. This was the lowest level in October.