• NZD climbs higher as the RBNZ has elevated its interest rate by 0.5%.
• An interest rate hike of 50 bps is higher than the estimate of 25 bps.
• Softer than expected US CPI also underpin bullish trend for kiwi.

New Zealand dollar is edging higher against its US Dollar counterpart during Wednesday trading session after the Reserve Bank of New Zealand (RBNZ) pushed its Official Cash Rate (OCR) higher by 50 basis points (bps).  Currently, the OCR of the RBNZ has reached 1.50%.

The RBNZ said in a statement accompanying its decision “A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment.”

Meanwhile, This is the consecutive fourth interest rate hike by the RBNZ. Earlier, a 25 bps OCR hike was expected in the monetary policy announcement by the RBNZ Governor Adrian Orr. And the market participants were expecting that the RBNZ will follow the streak of 25 bps OCR hike, which has been followed in the last three monetary policies announced in October 2021, November 2021, and February 2022.

Hawkish stance of the RBNZ indicates a swift mean reversion of OCR to its neutral rate. A tightening policy is needed to minimize the risk of soaring inflation in NZ and the RBNZ is capitalizing upon the same rigorously.

US Consumer Price Inflation report of Tuesday saw Core measures come in a little softer than expected which triggered a bout of profit-taking in USD long positions.

NZD/USD 4 Hour Chart:

Support: 0.6807 (S1), 0.6765 (S2), 0.6724 (S3).

Resistance: 0.6890 (R1), 0.6931 (R2), 0.6974 (R3).

The 50bps rate hike favors the NZD against the USD. We expect a bullish trend for NZD/USD.