NZD/USD corrects the bearish impulse in wild RBNZ ride

• NZD/USD is creeping back from the lows of the day.
• RBNZ hiked rates by 50bps, not traders will get set for next week's CPI.

At 0.6793, NZD/USD is back to being flat on the day after being thrown around in the aftermath of the Reserve Bank of New Zealand. The pair traded between a range of 0.6793 highs that were printed on the knee-jerk and the lows of 0.6788 made in afternoon London trade.

The RBNZ lifted the OCR by 50bps to 1.5% as the central bank moved aggressively to combat inflationary headwinds and to get ahead of the inflation curve. However, and as analysts at ANZ Bank noted, ''it’s been a wild 16 hours since the RBNZ hiked rates, with the Kiwi initially spiking sharply, only to completely unwind those gains and some as markets digested the idea that by going hard early, the RBNZ may not need to take the OCR as high later (certainly nowhere near the ~4.25% that was priced in by late 2023 yesterday morning).''

Meanwhile, traders will now look ahead to next week's Consumer Price Index. ''We think next week’s Q1 CPI data will robustly confirm that the 50bp hike was the right move. We estimate that headline annual CPI inflation rose to 7.4% in Q1, up from 5.9% in Q4,'' the analysts at ANZ Bank said. 

Bullish for NZD/USD, the analysts went on to explain, ''the RBNZ noted they expected inflation to peak “around 7%” in the first half of this year – but we see that as being closer to 7.5%. And with non-tradables inflation picked to hit 6.5% in Q1 (5.3% previously), the RBNZ still has a job to do to rein in surging domestic inflation pressures.  That speaks to another 50bp hike in May.''

NZD/USD daily chart

The price was testing a 38.2% Fibonacci retracement level before it dropped as markets repriced the prospects at the RBNZ. Depending now on the trajectory of the US dollar, the price could well continue lower towards the March 15 lows of 0.6729 in the coming sessions.