NZD/USD forecast ahead of the RBNZ interest rate decision

on May 23, 2023
  • The NZD/USD exchange rate rose slightly ahead of the RBNZ decision.
  • New Zealand will publish the latest retail sales numbers on Wednesday.
  • It is also tracking the latest Fed speak and US debt ceiling news.

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The NZD/USD exchange rate drifted upwards ahead of important macro news from the US and New Zealand. It was trading at 0.6300, ~1.632% above the lowest level last week. This price is a few points below the highest level this month.

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RBNZ decision ahead

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The most important NZD news will be the upcoming interest rate decision by the Reserve Bank of New Zealand. This decision, which is scheduled for Wednesday, will provide more color about the state of the country’s economy and what to expect.

Economists polled by Reuters expect the central bank will hike interest rates by 0.25% and push them to a multi-decade high of 5.50%. Like the other major central banks, the RBNZ has been hiking rates aggressively since October 2021.

These rate hikes are meant to help deal with inflation, which remains at an elevated level. The most recent data showed that the headline consumer price index (CPI) jumped to 6.7% in March. That was an improvement from the previous month’s 7.2%. But it is significantly above the RBNZ’s target of 2.0% and historic average.

The decision comes at a time when New Zealand’s economy is lagging. In fact, the bad shape of the economy helped to push the previous president out. Data published last week showed that the budget deficit widened to over N$6.63 billion as the government boosted spending.

The other forex news will be the latest New Zealand retail sales. Economists believe that the country’s core retail sales dropped by 1.0% QoQ in Q1 after falling by 1.3% in the previous quarter. On a year-on-year basis, analysts expect that retail sales jumped by 0.2%. 

If analysts are accurate, these numbers will show that the economy is indeed slowing. As a result, it could mean that the RBNZ will slow its rate hikes. 

NZD/USD forecast

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NZD/USD chart by TradingView

The other top NZD to USD catalysts will be the US debt limit news and the upcoming FOMC minutes. On the 4H chart, we see that the pair has been rising gradually in the past few days. Along the way, it has moved between the 38.2% and 50% Fibonacci Retracement levels.

The pair has also moved slightly above the 25-period and 50-period exponential moving averages (EMA) while the MACD has moved above the neutral point. Other oscillators have pointed upwards.

Therefore, there is a likelihood that the NZDUSD pair will rise and then resume the bearish trend after the latest RBNZ decision. A retest of last week’s low of 0.6182 cannot be ruled out.

NZD Reserve Bank of New Zealand USD Forex