NZD/USD to surge higher towards 0.7105 on a hawkish RBNZ surprise – TDS

The Reserve Bank of New Zealand (RBNZ) is likely to keep all policy settings unchanged and analysts at TD Securities see a similarly neutral reaction in the kiwi.

RBNZ is not rocking the boat

“We expect the MPC to keep all policy settings unchanged. Specifically, that means the OCR will remain at 0.25%, LSAP to total NZ$100b through August 2022, and for the FLP commitment to stay intact. There will be no forecasts or press conference alongside this policy announcement.”

“We anticipate a neutral statement. We expect the Bank to reiterate the need for ‘considerable time and patience’ to meet its inflation/employment goals and for it to be open to deploy negative interest rates if necessary. Market reaction should prove similarly neutral.” 

“In our base case, we look for NZD/USD to hold steady and track broader market direction overall. A hawkish surprise could see the NZD/USD pair test resistance around the 0.7105 mark, but we see this as quite unlikely. A dovish outcome could see the kiwi lower toward 0.6965.”