A hawkish RBNZ and a reassuring Fed pushed the NZD/USD higher.
Following Fed Chairman Powell’s remarks, the US dollar has been on the defensive.
Following a recovery from a low of 0.6938 to a high of 0.7043, the NZD/USD is currently trading at 0.7034, up over 1.3 percent in early Asia.
The market was trading higher on the basis of the Reserve Bank of New Zealand meeting, which was more hawkish than expected and put the Kiwi on a moderate rally, breaking the structure to the upside.
By the end of next week, the RBNZ will no longer be purchasing assets under the LSAP scheme (23 July).
“The RBNZ kept commentary about the timing of any OCR hikes vague in yesterday’s announcement, but they acknowledged stronger data by dropping the comment that reaching its targets would require “considerable time and patience,” which provided a clear nod towards OCR hikes starting sooner than previously envisaged,” ANZ Bank analysts said.
“We now expect the RBNZ to raise the OCR by 25 basis points in August, with more increases to follow.” CPI and labor market data should provide the RBNZ with the final piece of proof it needs to raise the cash rate.”
Meanwhile, the Federal Reserve’s chair, Jerome Powell, told Congress on Wednesday that the US economy was “still a ways off” from the levels that the central bank wanted to see before decreasing its monetary support.
Fed Powell said at the start of his two-day testimony to Congress that the Fed is confident that recent price rises are linked to the economic expansion and are only temporary./n
