RBNZ Pauses After 12 Consecutive Hikes

RBNZ Holds Rates SteadyFollowing 12 straight months of rate hikes, the RBNZ held monetary policy unchanged at the July MPR overnight. Sitting at 5.5%, the RBNZ noted that policy would remain unchanged for the foreseeable future, citing a technical recession in New Zealand. The bank note that its tightening campaign had helped curb spending as anticipated though noted that rates would need to stay at elevated levels for longer in order to drive inflation back down to target.RBNZ Rate Cut ProjectionsLooking ahead, the RBNZ projects that inflation will fall back to target by the second half of next year driven by easing consumer spending, reduced construction activity and house prices falling to more sustainable levels. With the RBNZ citing its intention to hold rates steady going forward, some players have immediately shifted into looking to project when the bank might start cutting rates back with some calling for rate cuts as early as the first half of next year.USD ImpactThe market reaction to the meeting has seen NZD softening a little from earlier highs. However, with USD still under pressure, NZDUSD is holding up and has room to move higher if we see USD fall on today’s CPI release.Technical ViewsNZDUSDThe pair continues to hold around the middle of the bear channel, testing resistance at the .6210 level currently. With the pair underpinned by support at the .6092 level for now, the focus is on a further move higher near-term with a break of the channel highs opening a test of .6385 above.