The NZD should remain bought into the RBNZ meeting this week as expectations are that there will be a 25bps rate hike. OiS swaps pricing are looking at a 100% probability of a 25bps hike to 0.75%. Some analysts think that the RBNZ could surprise with a 50bps rate hike. With New Zealand also planning to withdraw some more of its Covid restrictions the outlook for the NZD is tilted to the upside heading into the RBNZ meeting this week.
However, at the event, watch out for a buy the rumour sell the fact response if the RBNZ only do what the market was expecting them to do. For the NZD to continue rallying out of the meeting the RBNZ will need to take a more hawkish tilt. If the RBNZ does take a more hawkish tilt there are some decent seasonals favouring NZDUSD strength.
Over the last 10 years, NZDUSD has risen 90% of the time between November 19 and Dec 01 with an average return of 10.06%. The largest gain was in 2011 with a 4.08% rise. The largest loss was in 2013 with a -2.21% loss.
Major Trade Risks: A move towards earlier interest rates from the Fed will change this outlook as well any strong risk-off trading.
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