When is the RBNZ and how it could affect NZD/USD?

Early Wednesday at 02:00 GMT market sees monetary policy decision by the Reserve Bank of New Zealand (RBNZ). While the recent actions by the kiwi central bank dim prospects of any further moves during today’s monetary policy meeting, NZD/USD traders are interested to see how the RBNZ balances the domestic optimism with macro weakness amid the coronavirus (COVID-19) woes. Also interesting to note will be the policymakers’ signals to bond-buying and the Trade Weighted Index (TWI).

Ahead of the event, Westpac anticipate a little move for the markets while saying,

Westpac and the market expect the cash rate and the weekly pace of asset purchases to remain unchanged. The RBNZ may however choose to emphasize it has other policy tools available if further stimulus is required.

On the contrary, analysts at TD Securities said,

Expect the RBNZ to keep the cash rate on hold at 0.25%. The Bank is likely to acknowledge a quicker than expected unwind of local restrictions but highlight global risks remain uncertain. As such its likely to reaffirm it's prepared to use additional monetary policy tools if and when needed. There may be some scope to talk down NZD strength. Meanwhile, we don't expect the Bank to announce an increase to the LSAP.

How could it affect NZD/USD?

Considering the NZD/USD pair’s recent strength, amid broad risk-on mood and economic optimism at home, bulls are looking for upbeat comments in the Monetary Policy Statement (MPS).

FXStreet’s Dhwani Mehta says, “The MPS could offer a more optimistic outlook on the economy, given the country’s victory over the unprecedented coronavirus pandemic and recent better-than-fear economic indicators. Also, any hints on the negative interest rate policy (NIRP) in the MPS could be closely watched out for, especially in light of the recent NZD appreciation. To conclude, the traders could adopt the sell the fact trading approach for NZD/USD, as the status-quo is already priced-in. Also, the kiwi risks a correction following a 6% gain seen over the past month on the narrative of a quicker economic rebound. The bulls, however, should not lose heart, as a less dovish forward guidance could trigger an extensive rally in the spot. This looks likely if the RBNZ tames speculations for additional monetary policy support.”

Technically, NZD/USD seesaws around 0.6500, near a four-day top flashed the previous day, ahead of the key event on Wednesday. The pair’s immediate downside gets strong support from 21-day SMA and an ascending trend line from May 18 near 0.6420/15 while Tuesday’s spinning top on the daily chart suggests the consolidation of the quote. Alternatively, buyers are waiting for a clear break above 0.6500 to challenge the monthly high of 0.6585.

Keynotes

NZD/USD seesaws near 0.6500 amid retracement ahead of RBNZ

RBNZ Rate Decision Preview: Forward guidance holds the key, technical set up favors NZD bulls

About the RBNZ interest rate decision and rate statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.