NZD/USD, NZD/JPY: RBNZ not wilting on inflation focus despite double dip recession

The RBNZ kept its cash rate unchanged at 5.5% in April, as expected
It delivered one of the shortest statements on record. Growth is weak but inflation is still too high
NZD/USD and NZD/JPY are pushing higher given the RBNZ remains committed to lowering inflation despite growth risks

RBNZ keeps it short and sweet

After talking it up as the little central bank that packs a mighty market punch, the Reserve Bank of New Zealand (RBNZ) has delivered a nothingburger at its April monetary policy decision, keeping its cash rate unchanged at 5.5% and making no meaningful changes to its policy statement.

With limited new information at its disposal since it met in February, it should come as no surprise the entire document was over and done with in 140 words.

“The New Zealand economy continues to evolve as anticipated by the Monetary Policy Committee,” it said. “Current consumer price inflation remains above the Committee’s 1 to 3 percent target range. A restrictive monetary policy stance remains necessary to further reduce capacity pressures and inflation.”

Mirroring its own sentiment, the RBNZ noted most major central banks are “cautious about easing monetary policy given the ongoing risk of persistent inflation.”

Regarding the outlook, it acknowledged domestic economic growth remained “weak”. It said maintaining rates at a restrictive level for a sustained period will return consumer price inflation to within its target range by the end of 2024.

Total nothingburger, right?

New Zealand CPI arrives next week

Thankfully for traders, New Zealand’s March quarter consumer price inflation report arrives next Wednesday, providing an event that usually shakes things up. And, of course, the US inflation update for March arrives later in today's session. That’s always a volatility generator.

NZD/USD grinding higher

The Kiwi dollar has pushed higher following the statement, potentially reflecting no escalation in dovish rhetoric from the RBNZ despite New Zealand sitting in a double-dip recession. It has an inflation mandate and inflation remains too high to justify lowering rates yet.

With Monday’s bullish engulfing candle pointing to near-term upside, NZD/USD broke resistance at .6050 today, retesting the level before the RBNZ before resuming its path higher. It’s now grappling with the 50-day moving average, a level it has respected since the start of March.

Given the recent price action, and with RSI and MACD pointing to building upside momentum, dips between the 50DMA and .6050 can be used to enter longs, allowing for a stop to be set below the latter for protection. The initial target would be .6100, a minor resistance level the price tagged in March. Beyond, the downtrend running from late December around .6140 is another to consider.

NZD/JPY threatening bullish break

NZD/JPY is also trending higher, continually bouncing off uptrend support before running into resistance located at 92.20. With RSI and MACD pointing to building upside momentum, a possible break of 92.20 opens the door to a push towards the February high of 93.45. If we see 92.20 give way, traders can enter long positions with a stop below the level for protection.

-- Written by David Scutt

Follow David on Twitter @scutty

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.