- NZD/USD bulls were saved by softness in the US dollar again.
- The Fed minutes failed to support the greenback and the kiwi resumed its bullish flight path.
NZD/USD is ending in North American markets some 0.22% higher after recovering from the lows of 0.6417 to close around 0.6477. The bird fell from the post-Reserve Bank of New Zealand highs of 0.6514 as the US dollar found a bid ahead of the FOMC minutes.
The US dollar fought its way out of a two-day losing streak on Wednesday ahead of the release of the May meeting minutes, momentarily gaining a high of 102.449. Fed minutes largely endorsed the need for 50bp hikes in the near term, however, the minutes failed to mention prospects of larger rate hikes. That took some wind out of the US dollar’s sails. Consequently, risk assets rallied, including the kiwi.
A deep dive into the RBNZ
Analysts at ANZ Bank wrote a note with respect to the outcome of the Reserve Bank of New Zealand explaining that the RBNZ Monetary Policy Committee yesterday described themselves as “resolute” in their inflation fight, while acknowledging “strong” growth headwinds.
The 50bp rise was expected, but the OCR track reaching as high as 3.95% wasn’t, nor was its steepness, which implied further 50bp hikes in both July and August.
”There’s clearly been a big change of mood since April, when ‘The Committee remained comfortable with the outlook for the OCR as outlined in … February.’ It’s not entirely clear what the driver of that change has been, given inflation and labour data has actually come in much as the RBNZ expected.”
”Some of it will be due to the bigger-spending Budget (though in the press conference the Governor described the extra fiscal spending as small beer in the greater scheme of things); QES wage pressure also picked up markedly (not the RBNZ’s preferred measure, but the big upward revision to the RBNZ’s wage forecast was notable).”