RBNZ Preview: Rate rise unlikely to boost the bird - NZDUSD
Tony Sycamore November 23, 2021 11:02 AM
The Reserve Bank of New Zealand (RBNZ) raised the Overnight Cash Rate (OCR) by 25bp to 0.50% in October. Since then, the run of hot economic data has continued.
The Q3 unemployment rate fell to a record-equalling 3.4% at the start of November, matching the rate last seen in Q4 2007.
“The fall in the unemployment rate is in line with reports of difficulty finding workers and high labour turnover, and continued travel restrictions on international arrivals, which put pressure on domestic labour supply,” work and wellbeing statistics senior manager Becky Collett noted after the data was released.
Elsewhere, inflation is running at its highest level in a decade, and forward-looking indicators warn of further gains. Last week’s RBNZ survey of expectations noted a significant increase in inflation expectations. Both the 1 year and 2 year ahead measures jumped by 0.7% pts to 3.7% and 2.96%, respectively - well above the RBNZ’s 2% target midpoint.
The strength of recent data has the market fully priced for a 25bp hike to 0.75% tomorrow, and there is a 40% chance priced that the bank will hike by 50bp to 1.00%. Adding intrigue and uncertainty to the decision will be a new set of forecasts and an updated OCR track.
Therefore, trader interest will be two-fold. Firstly, on the size of the rate hike and secondly on the magnitude of the increase in the OCR track, with most expecting the track to pull forward forecast rate hikes and show an end rate near 3.00%.
Due to a considerable tightening in financial conditions via higher fixed mortgage rates, the RBNZ will likely only deliver a 25bp hike. A decision that has the potential to disappoint and keep the pressure on the NZDUSD in the face of a surging U.S. dollar
Technically, the NZDUSD has been trading within a downward sloping trend channel for the past nine months. Consider selling bounces back towards short-term resistance at .7000c, looking for a retest of the September .6860 low before a retest of the August .6805 low.
Source Tradingview. The figures stated areas of November 23rd, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
How to trade with City Index
You can trade with City Index by following these four easy steps:
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.