New Zealand Dollar gathers strength as RBNZ leaves the rate on hold at 2.25%
The NZD/USD pair attracts some buyers to near 0.5870 during the Asian trading hours on Wednesday. The New Zealand Dollar (NZD) edges higher against the US Dollar (USD) after the Reserve Bank of New Zealand (RBNZ) interest rate decision.
As widely expected, the RBNZ decided to hold its Official Cash Rate (OCR) at 2.25% after concluding the May monetary policy meeting on Wednesday. The New Zealand central bank said in its post-meeting statement that the committee remains focused on bringing medium-term inflation back to target and expects that OCR increases will be required this year.
All members agreed that increasing the interest rate at upcoming meetings would likely be necessary to ensure higher near-term inflation does not feed through to higher medium-term inflation.
Traders will closely monitor RBNZ Governor Dr. Anna Breman’s post-monetary policy meeting press conference at 03:00 GMT for more clues about the interest rate hike outlook this year.
“Our current forecast is for 50 basis points (bps) of tightening in 2026, though this is highly dependent on energy market dynamics. Swap market pricing is 21 bps for July and 75 bps by year-end,” ING’s FX strategists said.
The attention will shift to the US April Personal Consumption Expenditures (PCE) Price Index report, which will be published later on Thursday. The headline PCE Price Index is expected to show a rise of 3.8% YoY in April, compared to 3.5% in March. Meanwhile, the core PCE Price Index is projected to show an increase of 3.3% YoY in April, versus 3.2% prior.
Any signs of hotter inflation in the US could reinforce the expectation of the interest rate hike from the US Federal Reserve (Fed) this year and underpin the Greenback against the NZD.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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