NZDUSD Analysis – December 14, 2023

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Bloomberg – The NZDUSD climbed over $0.62, marking its highest value since July, as the US dollar experienced a decline following dovish remarks from the Federal Reserve. The US’s central bank maintained its interest rates, aligning with expectations. However, the Fed’s projection, known as the “dot plot,” suggests three rate cuts in the coming year.

Within New Zealand, investors are closely examining the Reserve Bank of New Zealand’s (RBNZ) monetary policy. Recent data indicates a potential slowdown in inflation during the fourth quarter, challenging earlier assumptions of a need for further interest rate hikes by the central bank. Specifically, New Zealand’s food prices, contributing 19% to the consumer price index, fell to 6% in November from 6.3% in October, the lowest since January 2022. Consequently, analysts are adjusting their inflation expectations downward for the quarter.

Last month, the RBNZ maintained the cash rate at 5.5%, but they also cautioned that an additional rate increase might be required if inflation remains persistent.

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NZDUSD – 4H Chart