NZD/USD jumps to 0.6720 as focus shifts to RBNZ rate hike

• NZD/USD looks firmer around 0.6720 ahead of Wednesday's RBNZ’s MPC meeting.
• The kiwi has outperformed the greenback despite the geopolitical jitters.
• The Fed may resort to a 25 bps hike amid tensions between Russia and Ukraine.

The NZD/USD pair has witnessed some significant bids on Tuesday around 0.6680, despite the geopolitical jitters amid Russia and Ukraine. At the time of writing, the major is juggling near 0.6710 but is likely to extend gains further towards 0.6750 on a 25 basis points rate hike expectation by the Reserve Bank of New Zealand (RBNZ) in their monetary policy statement on Wednesday.

It is worth noting that the RBNZ has increased its interest rates by 0.75% in the last six months. And, New Zealand’s central bank is upfront with one more hike for Tuesday as per the market consensus.  The latest print of kiwi’s inflation at 5.9% is significantly higher than the average range of 1-3% in the last two decades. To combat the ramping-up inflation, the RBNZ needs to bank upon interest rate hikes despite the rising geopolitical tensions, which has jeopardized the decision-making for various central banks.

Russia's recognition of two of Ukraine's eastern regions: Donetsk and Luhansk as ‘independent’ has spooked the market sentiment. Global markets are plunging and risk-sensitive assets are not finding any ground. Despite a highly uncertain market, the kiwi is outperforming against the greenback since the first tick of the Asian session.

The US dollar index (DXY) retreats from Tuesday’s high at 96.24, as investors believe that the Federal Reserve (Fed) may not approach a tightening monetary policy, keeping in mind that geopolitical tensions between Russia and Ukraine can pose serious threats to the global economy. However, the upside in the index is still intact.

NZD/USD technical levels to watch