May 23, 2023

AUDNZD is trading near support with the latest Reserve Bank of New Zealand press conference ahead. 

AUDNZD – Weekly Chart

AUDNZD – Weekly Chart

The price of AUDNZD is testing an uptrend support line from early 2020 ahead of the RBNZ. 

New Zealand’s central bank is set to raise interest rates for a 12th straight time as higher immigration and loose fiscal policy pressure inflation. 

The Reserve Bank is expected to increase its benchmark rate by 25 basis points to 5.5%, according to 18 of 21 economists surveyed by Bloomberg. The remaining three expected a 50bps increase, but the bank could signal further hikes later. That could be the fuel for an increase in the price of the NZD dollar. 

“Fiscal spending and a surge in migration suggest a higher peak in interest rates than signalled in February,” said Kelly Eckhold, chief economist at Westpac. “The RBNZ may not move immediately to Westpac’s 6% OCR peak but will signal an openness to get there.” 

New Zealand may not see the 2023 recession the RBNZ has been expecting, as record inflows of migrants are adding to growth and inflation. Migration is expected to ease shortages in the labour market and add to the demand for goods, services, and property. Westpac has estimated a net inflow of 100,000 people in 2023, adding around 2% to the population. 

RBNZ Expected To Raise Interest Rates

The RBNZ added a larger-than-expected 50-point rate increase at its previous meeting in April, which may mean a minor increase this week. 

“There are some who believe the main reason the RBNZ went 50 at its last meeting when most thought 25 was the most likely outcome, was because it had decided to minimise the chance that it would have to be aggressive post Budget so as not to become embroiled in the political process,” Bank of New Zealand said. 

With a general election set for October, opposition parties already say the budget will add to inflation and cause more mortgage pain for households.

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