• NZD/USD falls during the day by around 0.36% as investors brace for the RBNZ.
  • Mixed economic data in the United States has reignited fears of a recession in the United States.
  • The RBNZ is expected to raise the OCR by 50 basis points to 3% on Wednesday.

NZD/USD fell in the North American session on general US dollar strength, despite a risk boost in financial markets after mixed US economic data led to recession fears. resurfaced. As of this writing, NZD/USD is trading at 0.6341, down 0.35%.

US equities reflected investors’ optimistic mood, thanks to positive US data. July industrial production rose at a 0.6% month-on-month pace, beating estimates, buoyed by motor vehicle sales. Although the news was positive, missing estimates for building permits and housing starts, recording negative impressions, capped the rise in US dollar prices.

As a result, NZD/USD pared some of its earlier losses after hitting a daily low at 0.6316. However, an impending monetary decision by the Reserve Bank of New Zealand (RBNZ) is keeping NZD/USD buyers hoping for higher prices, with expectations of a 50bps hike fully priced in.

According to a Reuters poll, the RBNZ is expected to raise the overnight cash rate (OCR) by 50 basis points to 3.00%, which would be its most aggressive tightening since 1999.

Read also : RBNZ preview: predictions from big five banks, all eyes on future policy path

Meanwhile, five major banks in their outlooks expect the RBNZ to raise rates by 50 basis points on Wednesday, but there are some differences regarding the forward guidance the bank will use.

ANZ and Westpac expect hawkish commentary, and the central bank would send a clear signal that the fight against inflation is well underway.

Bank of America believes the forecast would remain hawkish, but they expect the bank to add “conditionality” to the magnitude of subsequent rate hikes. Also, expect the bank to recognize that growth is slowing.

TDS believes the bank will emphasize that inflation risks are on the upside and should dominate RBNZ communication. On the contrary, ING estimates that the bank would rise by 50 basis points, but suggests that the RBNZ “will have to revise its rate path projections downwards”.

What to watch

On Wednesday, the Reserve Bank of New Zealand will unveil its monetary policy decision. On the US front, the dossier will feature US retail sales, the July FOMC minutes and the Fed speech.

NZD/USD key technical levels