RBNZ's Growing Inflation-Fighting Assertiveness Provides Tailwind For Kiwi

NZD/USD caught a bid Wednesday as the RBNZ raised the OCR by 50bp and signalled readiness to quickly bring the key interest rate into restrictive territory in pursuit of its inflation target. The pair soared to a three-week high of $0.6514, but pulled back sharply in the London morning. Subsequent recovery allowed NZD/USD to return above neutral levels.

• NZ 2-Year swaps surged 23bp after the release of the Monetary Policy Statement, the largest jump since October. AU/NZ 2-Year swap spread fell sharply, driving AUD/NZD to its worst levels in almost a month.
• RBNZ Gov Orr told lawmakers this morning that interest rates may need to remain "north of neutral" for some time. He refused to rule out a recession, but said he did not predict one.
• Fonterra forecast milk price for the new season that starts next month within a wide range of NZ$8.25-NZ$9.75/kg of milk solids, citing "an increasingly volatile global environment."
• Spot NZD/USD last trades at $0.6484, up 9 pips on the day. A break above yesterday's high of $0.6514 would bring May 5 high of $0.6568 into play. Conversely, bears look for a retreat past May 18 low of $0.6291, before taking aim at May 12 low of $0.6217.
• As the dust settles after the RBNZ's monetary policy decision, focus turns to ANZ Consumer Confidence, due Friday.