Home » Daily Commentaries » NZD outperforms as RBNZ plots a hawkish path

NZD outperforms as RBNZ plots a hawkish path

Thursday 24 February, 2022

Daily Currency Update

The New Zealand dollar advanced through trade on Wednesday, building on recent upward momentum as the RBNZ offered a hawkish tone and strength across key commodities continues to outweigh the effects of a diminished risk appetite. Having tracked sideways through the morning the NZD shot higher following the RBNZ’s policy update and rate statement. Policy makers issued a more hawkish than anticipated policy statement coupled with a 25-basis point increase in the OCR. Markets had expected the RBNZ would raise rates but had not factored in an increase in the banks rate projections. Policy makers increased their terminal rate expectations from 3% to 3.35%, as inflation and price pressures continue to rise. The announcement helped lift the NZD through 0.6750, while ongoing demand for commodity currencies saw it briefly break above 0.68. The NZD has largely held onto yesterday’s gain opening only marginally below the intraday high at 0.6770. With little of note on today’s ticket all eyes remain on developments in Eastern Europe.

Key Movers

Price action across major currencies was largely muted through trade on Wednesday as commodity currencies outpaced their counterparts, while the euro and GBP edged lower. Demand for risk remains depressed and with few new developments emerging from Russia and Ukraine, markets appeared content in sideling major bets. With the US, EU, UK, Australia, Japan and Canada all imposing sanctions on Russia, there is a real fear war will derail the global economic recovery and drive inflationary pressures higher still. War increases the burden on major central banks to control inflation pressures as the cost of key non-discretionary items like fuel and food continue to rise. With household expenses expected to rise across Europe a greater strain is placed on consumers, diminishing the likelihood of a consumer led recovery. With little of note on today’s ticket our attentions remain with developments in Eastern Europe.

Expected Ranges

  • NZD/USD: 0.6680 - 0.6820 ▲
  • NZD/EUR: 0.5920 - 0.6050 ▲
  • GBP/NZD: 1.9880 - 2.0180 ▼
  • NZD/AUD: 0.9320 - 0.9420 ▲
  • NZD/CAD: 0.8580 - 0.8680 ▲