The RBNZ’s Monetary Policy Statement send the NZD lower 0.60% against the dollar.

As it was widely expected, the Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent.

Exchange rate-  The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector. A decline in the exchange rate is needed. Higher commodity prices and New Zealand’s positive growth outlook have contributed to upward pressure on the New Zealand dollar since November.

Policy assessment- Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.

Inflation- Annual CPI inflation was 1.3 percent in the December 2016 quarter, returning inflation to within the Bank’s target range.

Hawkish OCR projection-The new OCR projection was hawkish, showing the OCR  flattening at 1.8%  until September 2019 and raising to 1.9% and 2.0% gradually.

Macroeconomic outlook-

  • The TWI is currently around 4 percent higher than forecast in the November Statement. Annual GDP growth is expected to average 3.6 percent over the next two years, consistent with the projection in the November Statement.
  • Employment growth is expected to remain strong, with the unemployment rate gradually declining to 4.5 percent.
  • Nevertheless, with GDP growth exceeding this strong growth in potential output, capacity pressure is projected to increase, with the output gap peaking at around 1.5 percent of potential output in 2018.
  • Annual CPI inflation is projected to settle near 2 percent in 2019.
  • The OCR would need to be around 50 basis points higher than the central projection to ensure inflation settles around 2 percent in the medium term.

RBNZ Chairman Wheeler said, Over time, New Zealand may need to raise interest rates after two or more years during the press conference.

Following MPS NZD fell 0.60% against the USD low made at 0.7245 manages to hold the 20Dsma finds at 0.7230. On the hourly chart, the kiwi dollar spotted with a bearish H&S pattern aiming at 0.7235.

Support: 0.7220, 0.7180 and 0.7130/0.7110

Resistance: 0.7285, 0.7335 and 0.7375

Potential support zone finds between 0.7140 and 0.7120 area. The 50Dsma finds at 0.7100.

AUDNZD rose 0.80% high made 1.0525 trading slightly above 20Dsma. The immediate resistance seems at 1.0560 200Dema and January high seems at 1.0565.