RBNZ Unexpectedly Holds Official Cash Rate at 2.75%, NZD Sinks
| Pair | Now | Since publish |
|---|---|---|
| NZDUSD | — | — |
- RBNZ unexpectedly held OCR at 2.75%, defying near 90% hike pricing; vote 4-3
- NZD/USD fell below 0.5600, hit two-week low at 0.5584, then rebounded near 0.5640
- Economists expect hikes in December and February; RBNZ calls hold a temporary pause
- Technicals: 0.5567 year-to-date low in view; 0.5640 recovery target toward 20-day EMA
The Reserve Bank of New Zealand (RBNZ) is widely anticipated to raise its Official Cash Rate (OCR) by 25 basis points (bps) to 3.0% at its policy meeting on Wednesday, October 28. Money markets are pricing in a near 100% chance of this hike, with analysts citing persistent inflation risks, including higher oil prices and a weaker New Zealand Dollar. While the New Zealand Dollar (NZD) has seen some gains against the US Dollar (USD) in anticipation, its upside has been tempered by broader USD strength ahead of the US Federal Reserve’s (Fed) own policy decision later in the week. Analysts are closely watching for future guidance, with some forecasting additional 25bps hikes in December and February, potentially lifting the terminal rate to 3.50%, though others caution that a neutral RBNZ stance could lead to NZD downside given current pricing.
The Reserve Bank of New Zealand (RBNZ) unexpectedly held its Official Cash Rate (OCR) at 2.75% at its latest policy meeting, defying broad market consensus for a 25 basis points (bps) rate hike. Following the announcement, the New Zealand Dollar (NZD) came under intense selling pressure, with the NZD/USD pair dropping below 0.5600. The central bank did, however, signal that further rate hikes will likely be needed.
The New Zealand Dollar (NZD) continued to experience significant selling pressure on Wednesday, with the NZD/USD pair falling 1.28% to trade near 0.5600. The kiwi dollar was notably weakest against the Australian Dollar (AUD) among major currencies.
The Reserve Bank of New Zealand’s (RBNZ) decision to hold its Official Cash Rate (OCR) at 2.75% was made with a 4-3 vote. Meanwhile, the NZD/USD pair is testing a crucial multi-month support zone at 0.5560/0.5550. A sustained break below this level could expose the pair to further declines towards 0.5480 and 0.5420, while any short-term rebound may be capped at 0.5710.
The New Zealand Dollar (NZD) extended its decline, with the NZD/USD pair falling by up to 1.6% and hitting two-week lows at 0.5584. Bears are now eyeing the 18-month low at 0.5564. RBNZ Governor Anna Breman was noted hinting at future policy, while the central bank’s signal for further tightening was specifically aimed at combating rising fourth-quarter inflation.
Following the Reserve Bank of New Zealand’s (RBNZ) decision to hold rates, analysts are providing their forward guidance. UOB anticipates a 25 basis points (bps) rate hike to 3.00% at the December Monetary Policy Statement meeting. Meanwhile, Standard Chartered forecasts 25 bps increases in both December and February, which would bring the Official Cash Rate (OCR) to 3.25%, with a possible additional hike in March if domestic inflation remains persistent.
The Reserve Bank of New Zealand’s (RBNZ) decision to hold its Official Cash Rate (OCR) at 2.75% came despite markets having priced in a hike near 90%. The 4-3 vote saw RBNZ Governor Anna Breman among the four members who voted to hold rates, while all five of New Zealand’s major banks had forecast a third consecutive rate hike. Following the announcement, the NZD/USD pair fell below 0.5600 for the first time since October 15, though it has since climbed back to just above this level.
On Thursday, the NZD/USD pair saw a modest Asian session uptick to the 0.5635-0.5640 region before attracting sellers and trading around 0.5620. Meanwhile, OCBC strategists now anticipate two further RBNZ rate hikes in December and 1Q27, and they have flagged 0.5600 as a key near-term level for the NZD/USD, suggesting it could cap further downside.
On Friday, the NZD/USD pair edged lower in the Asian session to the 0.5630-0.5625 region, reversing part of Thursday’s modest uptick and stalling its bounce from the two-week low at 0.5584 hit after the RBNZ decision. The pair is on track for its first weekly loss in three weeks, with the heavy decline driven by the RBNZ’s unexpected hold at 2.75%. A softer US Dollar is limiting further downside for the kiwi. Earlier on Thursday, FXStreet noted the pair turned negative on the daily chart at 0.5615 at the European open, after the rebound was capped near 0.5635. The year-to-date low at 0.5567 is now in view, and the short-term bearish trend remains intact following Wednesday’s drop of nearly 1%.
A Bloomberg survey of economists shows the RBNZ is likely to raise the Official Cash Rate at its next two meetings, in December and February, before pausing. On Friday, NZD/USD extended its recovery to near 0.5640 during European trading, rebounding after Wednesday’s sharp drop that followed the RBNZ’s unexpected hold at 2.75% (a hike to 3% had been expected). FXStreet’s technical outlook points to a possible further recovery toward the 20-day EMA. The RBNZ has described the hold as a temporary pause, saying it remains on a tightening path because of upside inflation risks. Commerzbank is also cited as expecting an RBNZ pause.