RBNZ Policy Decision Selling news or a big surprise ?

New Zealand Reserve Bank, the king of the current global consolidation cycle, is expected to announce its third-quarter increase in five months after the policy meeting concludes Wednesday at 01:00 GMT. Still, Kiwi is lagging behind in the FX position, losing more than $ 2.0% and if one believes the policy decision will change wealth at this point, it would be better not to take their assets. Breathing.

Interest rates rise to pre-epidemic levels

Investors are confident that the RBNZ will raise interest rates by up to 1% as inflation rises by 5.9% y / y in the last quarter of 2021 over three decades. 1-3 percent of the target area is the first of its major counterparts to implement the plan.

Further price increases are coming

However, data from around the world indicate that supply chain warming will continue at the beginning of the new year, and a recent study by RBNZ shows that one year and two years of inflation are still a long way off. Steam is expected to increase by more than 3.0%. High mortgage rates may have had some effect in the hottest housing market, according to the REINZ asset report, which saw housing prices fall and sales declining in January, although policymakers are likely to demand more convincing downturns and tighten their grip on policy. Until they finish the job.

Future markets are currently fully bidding on six additional inflation rates in October, with most loan costs expected to increase by 2.5% by November 2022. Basically, the economic picture is not very bright. The government has closed its borders to foreign investors, restricted imports of labor, and pushed unemployment to a record low of 3.2 percent in December, but this has exacerbated labor shortages.

Gross domestic product (GDP) data shows a contracted economy in the third quarter, indicating that retail sales have returned to the negative in the last three months of the year and that business confidence is declining. Adding to the latter, despite the high price of milk due to the outbreak of the epidemic and strict environmental regulations, farmers used it to pay off debt instead of re-investing it in their businesses. Perhaps this will have more weight on next year’s production.

Communication will be important

With the first policy meeting scheduled for November and scheduled to meet again in two months’ time, the RBNZ’s view of the economy and its market relationship could give new traders a new direction. However, with the growing geopolitical tensions on the Ukrainian border, the Central Bank is likely to increase its rate by 25 bps to ease inflation, as other central banks have done. Unfortunately for those who expect a further 50 bps increase.

NZD / USD

Therefore, unless the RBNZ brightens the future of the New Zealand economy or contributes to the rapid financing, the policy announcement itself may not be a big surprise for investors, and selling the news could be a common occurrence. If this is the case, the Kiwi / dollar above the 0.6730 and the 50-day light moving average (SMA) may miss the clear trend line, next to the known 0.6600 support band. A downward spiral could jeopardize a 15-month low of 0.6528.

If the central bank relies on the economy and indicates that it is ready to use all options to bring inflation to its target level, the Kiwi / dollar could cross the 0.6730 limit and reach 0.6790, including a sharp rise. – 0.6800 Defense Zone. Beyond the latter, the rally could lead to a test in the 0.6870 – 0.6900 range.

Otherwise, New Zealand-based commodity exchange rates could remain volatile.

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