New Zealand Dollar Talking Points
NZD/USD[1] outperforms its major counterparts even as Federal Reserve Chairman Jerome Powell strikes a hawkish tone in front of U.S. lawmakers, but the broader outlook for the exchange rate remains tilted to the downside as both price and the Relative Strength Index (RSI) preserve the bearish trends from earlier this year.
NZD/USD Rebound Fizzles as Fed Chairman Powell Sticks to Hiking-Cycle
The updates to New Zealand’s Consumer Price Index (CPI)[2] has propped up NZD/USD as the report revealed the core rate of inflation climbing 1.7% per annum in the first-quarter of the year to mark the fastest pace of growth since 2011.
However, the data may do little to sway the monetary policy outlook as the Reserve Bank of New Zealand (RBNZ) insists ‘consumer price inflation remains below the 2 percent mid-point of our target,’ and Governor Adrian Orr and Co. may attempt to buy more time at the next meeting on August 9 as the central bank pledges to keep the official cash rate (OCR) at ‘an expansionary level for a considerable period.’
The deviating paths for monetary policy is likely to keep NZD/USD under pressure as the Federal Open Market Committee (FOMC)[3] appears to be on track to implement higher borrowing-costs, and it seems as though Chairman Powell & Co. will deliver four rate-hikes in 2018 as the committee ‘believes that--for now--the best way forward is to keep gradually raising the federal funds rate.’
In turn, the FOMC[4] may continue to prepare U.S. households and businesses for higher interest rates even though the central bank is widely expected to keep the
