DBS Group Research’s Philip Wee expects the Reserve Bank of New Zealand to keep policy on hold at its April 8 meeting, looking through energy-driven inflation. He notes Governor Anna Breman’s conditional hawkishness if inflation expectations de-anchor. Wee highlights that NZD/USD has already retraced most of its prior rally and may find technical support near 0.5630 along a trendline.

RBNZ caution and key FX support

"The Reserve Bank of New Zealand will adopt a wait-and-see stance at its April 8 meeting."

"Governor Anna Breman and Chief Economist Paul Conway will look through the energy-driven headline inflation spike. By holding the official cash rate steady at 2.25%, the RBNZ aims to support a soft landing while avoiding a premature tightening that could risk a return to recession."

"However, Breman has also signalled a readiness to hike rates should the oil disruptions threaten to de-anchor inflation expectations, i.e., push core inflation and wage growth above the 1-3% target band."

"If Breman reaffirms this hawkish stance, NZD/USD may find support near 0.5630, along a trendline, after retracing more than 75% of its November-January rally from 0.56 to 0.61."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)