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NZD/USD moves higher on second rate hike, upbeat RBNZ

The Reserve Bank of New Zealand hiked the interest rate once again, from 2.75% to 3%. This was widely expected and came after the first rate hike was prepared for a long time.

However, the central bank held up its hawkish tone despite the recent strength of the currency, and allowed this currency to continue rising.

And the currency did rise back to higher ground:

NZDUSD higher April 25 2014 after second rate hike in New Zealand forex hourly chart

NZD/USD was hit by the low inflation figure, that allowed an opportunity for a big consolidation. The RBNZ did acknowledge the lower inflation but still stated that inflationary pressures are increasing and that they would continue strengthening in the next two years. This is certainly a strong hawkish bias.

Regarding the exchange rate, they did mention it is a headwind and even “unsustainable”, but this is not news. Wheeler and his colleagues have been trying to talk down NZD for quite some time.

Needless to say, the next moves are data dependent: stronger inflation will probably result in a faster pace of hikes while lower inflation could slow down the pace.

Analysts in New Zealand see a good chance of a third rate hike in the next meeting scheduled for June. Regarding a hike in July, there is no clear consensus.

NZD/USD is now trading well above 0.86. The move higher met resistance just under the 0.8640 line. Further lines above are 0.8676 and 0.8745. Below, 0.8555 provides support. For more, see the NZDUSD prediction.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.