NZD/USD is trading quietly within range, with investors cautious ahead of RBNZ’s policy decision this Wednesday. Market consensus is for a 25bps cut, though the NZIER Shadow Board revealed a broad spread of opinions, from a 50bps reduction to no move at all. The diversity highlights some uncertainty surrounding the policy outlook.
According to the Shadow Board, the case for a cut is backed by persistent slack in the labor market and subdued domestic activity. Still, near-term inflation pressures complicate the picture. While one board member argued for a more aggressive 50bps cut to support growth, two stressed the risks of loosening again with price pressures still elevated.
Looking further ahead, views on the OCR in 12 months are diverse, from no additional easing to further cuts required. One member sees strong commodity prices and lower rates supporting activity, with inflation potentially rising toward the top of the RBNZ’s 1–3% target band. That backdrop suggests patience may be prudent. Though, two members maintain the economy will still need further stimulus beyond August.
Technically, NZD/USD remains mildly bearish as its stays confined within the near-term falling channel. Rebound from 0.5855 appears to have topped out at 0.5995. Fall from there is seen as another leg of the decline from 0.6119.
Structurally, while the pullback from 0.6119 looks corrective, risks are skewed toward another dip. A slide to 50% retracement of 0.5484 to 0.6119 at 0.5802 is in favor before NZD/USD finds a firmer base.
