Kiwi finds no solace in hawkish RBNZ

The old market adage says that if something can not rise on good news, then ..

This could very well be the case for the Kiwi as it feeds more on the risk tones than the hawkish RBNZ from earlier in the day. In case you missed it, the central bank decided to raise rates by 50 basis points as expected, but provided hawkish undertones in its message.

On the one hand, they have revised their OCR trail up by 30 basis points to 3.70% by the end of this year and see the terminal rate at 4.10% from 3.95% previously. They also mentioned that:

“Underlying consumer price inflation remains too high and labor resources remain scarce.”

Their insistence that inflation is “too high” pretty much indicates that they will keep pace with the aggressiveness. As such, no subtle changes from the RBNZ yet (unlike what we’ve seen from the Fed, RBA and BOE).

That said, all of this is still not enough to lift the kiwi as NZD/USD has seen its earlier advance erased and is now falling to the day’s low as risk sentiment remains on edge. Rising bond yields appear to be weighing on equities as S&P 500 futures are down 0.4% on the day and European indices are also slightly lower, weighing on risk sentiment.

For NZD/USD, price is now testing the 38.2 Fib retracement level at 0.6312 with trendline support (white line) holding nearby at 0.6292 before dropping back to the level of 50.0 Fib retracement at 0.6264. These are key levels to watch to see if buyers should take a position, but the fact that even a more hawkish RBNZ is not cutting it is rather worrying.

However, there could be good news as the focus will soon shift to dollar sentiment instead with US retail sales and FOMC meeting minutes later today. But it could also play against the kiwi if the publications signal more bullish sentiment for the greenback to close out the week.


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