Kiwi Hovers Above Six-Week Low Ahead Of RBNZ Decision

NZD/USD overnight implied volatility reached its highest level since the Oct 5 FOMC monetary policy decision on Tuesday and remains elevated, as RBNZ MPC are wrapping up their meeting, set to release the latest Monetary Policy Statement within less than two hours. Spot NZD/USD sits at $0.6954 as we type, a touch higher on the day.

• The rate round tripped from a fresh six-week low yesterday, which keeps focus on the downside. From a technical perspective, a sell-off past Oct 6 low of $0.6877 would expose $0.6860, which limited losses on Sep 29 & 30. Conversely, a rebound above the 50-DMA/Nov 18 high at $0.7045/53 would bring Nov 15 high of $0.7081 into play.
• The OIS strip fully prices a 25bp hike to the RBNZ's benchmark policy rate come the end of today's meeting, which is the base-case forecast of most sell-side analysts. However, many see a non-negligible risk of an outsized 50bp hike, while market pricing implies a ~34% chance of such scenario coming to fruition. Please refer to our comprehensive preview for more colour on today's monetary policy decision.
• Looking further afield, New Zealand's monthly trade data will be published on Thursday, while ANZ Consumer Confidence is due Friday, albeit the MPC meeting clearly steals the limelight locally this week.