The New Zealand dollar may not meet the market's expectations concerning its further rise. Analysts and investors think the kiwi will go up due to the forthcoming meeting of the regulator where the rate will be fixed.
At the beginning of the week the New Zealand dollar dropped to 0.21% ahead of the Reserve Bank of New Zealand (RBNZ) meeting.The economists expect the interest rate hike for the first time in the last 7 years. Analysts consider this event to be the key one this week. Investors' expectations of a potential rate hike reach 90%, but current issues might be an important obstacle for the RBNZ's monetary policy changes. They include another lockout in neighboring Australia, new outbreaks of the COVID-19 delta strain worldwide, and New Zealand's domestic economic problems.
The regulator will announce its interest rate decision on Wednesday, August 18. Most analysts inclined to its rise by 25 basis points (bps). With this scenario, New Zealand would be the leader among developed countries in the Asia-Pacific Region (APR) which turned to its monetary policy improvement. It would probably be the first rebound since 2014.
Currently, the country's monetary policy is determined by such indicators as inflation and labor market dynamics. According to current reports for the first quarter of 2021, the consumer price index in New Zealand was 0.8% q/q. In the second quarter, the inflation rate set a record of 1.3% q/q. At the same time, public employment increased several times: in the first quarter of this year the labor market rose by 0.6% q/q. and in the second by 1% q/q respectively. As for New Zealand's GDP, it went up to 1.6% q/q. in the first quarter of this year, which is higher than expected 0.5%. According to experts, it will be an additional argument in favor of the possible tightening of MP by the regulator.
From the point of view of technical analysis, the New Zealand dollar is far from being a loser. Analyzing the chart of the NZD/USD pair, experts pay attention to the formation of a cup with a handle pattern. It is a reversal point, which may give a powerful boost to the bulls in NZD. Earlier the tandem held firmly near the mark 0.6900, in the support zone, and the resistance line 0.7050. On Tuesday, August 17, the NZD/USD pair was near the 0.6915 mark. According to the fundamental and technical data, further rise of the New Zealander dollar is highly probable.
Many experts are positive about the prospects for the New Zealand dollar in the near future. According to currency strategists at CitiBank, this result is expected for the kiwi ahead of the RBNZ meeting. The experts in the Citibank underline that at the moment a key rate hike from 0.25% to 0.5% is possible on the part of the RBNZ. They think that a 0.5% rate hike is risky, but not unlikely. The experts added that in near future possibilities for its increase will be limited, but the NZD/USD pair will show rebound.
The positive factor for kiwi rise is stable economic recovery in New Zealand. At the moment the labor market returned to the pre-crisis level and the cost of housing goes up. Experts consider two variants: rate lifting with the subsequent room for maneuvering and increase as a point in the matter. If the Central Bank raises the rate and signals to the market that this is not the last stage, the kiwi will rise dramatically. In the case of a rate hike and the regulator's cautious tactics, the New Zealand dollar will drop despite the tightening of the QE.
