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Kiwi Dives After RBNZ Decide Against More Aggressive OCR Hike


NZD/USD was in retreat Wednesday, following the RBNZ's decision to raise the OCR by 25bp. The move fell in line with consensus forecast, but some participants betting on a 50bp hike were left disappointed. During the subsequent press conference, Gov Orr noted that the Reserve Bank intend to take a cautious approach to tightening and move in 25bp increments "for now," which is warranted by large amount of household debt.

  • In today's interview with RNZ, Gov Orr reiterated the plan to raise the OCR to about 2.5% in "slow, steady steps," with ability to assess along the way "if we're still on the right path and if we're going fast enough." Orr expressed the view that inflation expectations remain anchored.
  • Wednesday saw NZD/USD tumble through the base of a bull channel drawn off Aug 20 and probe the water below $0.6860, which limited losses on Sep 29 & 30. The pair last trades flat at $0.6875 and a clean breach of yesterday's low of $0.6856 would open up Aug 20 low of $0.6805. On the flip side, bulls look to a rebound above Nov 18 high of $0.7053.
  • The leadership crisis in the main opposition National Party resulted in an emergency caucus meeting, which led to the ouster of Judith Collins as party leader, albeit she will stay on as an MP.
  • On the data front, New Zealand's monthly trade deficit shrank to NZ$1.286bn in October from NZ$2.206bn, as exports picked up to NZ$5.35bn from NZ$4.36bn. Looking ahead, ANZ Consumer Confidence will be published on Friday.

Fig. 1: NZD/USD

Source: MNI - Market News/Bloomberg

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