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PrimeXBT Lead Analyst Kim Chua: Hawkish Central Bank and Hot Inflation Numbers To Propel New Zealand Dollar Higher

PrimeXBT Lead Analyst Kim Chua: Hawkish Central Bank and Hot Inflation Numbers To Propel New Zealand Dollar Higher

The New Zealand Dollar is the talk of the town after the RBNZ surprised markets during their regular interest rate policy meeting. While RBNZ kept rates unchanged at 0.25%, the central bank abruptly ceased its quantitative easing altogether, prompting traders to start pricing in an earlier rate hike from the Kiwi.

The Reserve Bank’s Monetary Policy Committee, led by Governor Adrian Orr, on Wednesday said it will halt bond buying under its “Large Scale Asset Purchase” program by July 23. The statement omitted a previous reference to the need for considerable time and patience to achieve its inflation and employment goals.

Then on Friday, the release of Q2 inflation data further added flames to the hawkish fire. The headline CPI came in hot like coal, at an increase of 3.3% yoy (vs expected 2.8%) and 1.3% (vs expected 0.8%) for the quarter alone. Expectations and market pricing for a near-term cash rate hike from the RBNZ rose as a result; while last week the consensus expected a hike in November this year, expectations now are for a rate hike on the RBNZ’s next meeting scheduled on August 18. If official employment data due on August 4 is good as well, one can almost bet on his bottom dollar that the RBNZ will start to hike rates. 

 

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