NZD/USD hovers around 0.7030 amid RBNZ rate hike expectations

• NZD/USD has recaptured 0.7000 amid a revival of the RBNZ rate hike calls. 
• The RBNZ has posted the country's inflation expectations to 3.7%, the highest since 2010.
• The kiwi's resilience will be put to the test amidst an aggressive rate hike cycle. 

NZD/USD is trading around 0.7030, as investors seek fresh rate hike cues after the Reserve Bank of New Zealand (RBNZ) posted sharp inflation expectations numbers on Thursday. At the time of writing, the currency pair is trading at 0.7024, up 0.41%. 

On a weekly basis, the pair has been deteriorating for three consecutive weeks due to a broadly firmer US dollar and contributions made by the slipping EUR/USD, which is expected to continue its southward trend.

The RBNZ earlier in the day said that the country's inflation expectations for the fourth quarter rose sharply to 3.7%, the highest since 2010. Some interest rate increase is likely to follow up next week to curb the inflated numbers. The RBNZ is aiming to keep New Zealand's inflation between 1% to 3%, with a central target of 2%.

Recently, the New Zealand dollar has had a good thing going with rising rate hike probabilities from the RBNZ. But experts believe, it can be a source of weakness for the pair's price action. Rates markets are pricing in a 25-bps rate hike at each RBNZ meeting could lead to the most aggressive rate hike cycle by any major central bank since the post-global Financial Crisis era.

Goldman Sachs analysts say Antipodeans are likely to remain weaker against the US dollar, but the kiwi's resilience will thrive. It further said, "Our views on the RBA are fairly dovish, as the economy faces softer wage and inflation dynamics and risks from a potential slowdown in Chinese growth. Our forecasts for AUD, as a result, are fairly negative versus USD over a 12-month horizon."

"In contrast, our forecasts for the RBNZ are far less dovish, though our projections of the terminal rate are lower than market expectations, and we expect NZD to be dragged down vs USD along with AUD," it added.

On the other side, the mighty US dollar that ran out of impetus, stayed below a 16-month high, with DXY falling back to the 95.80s on Thursday. However, with a high probability of a Fed rate increase in June, followed by another in November, it is expected to stay elevated.

With the absence of domestic drivers this week, the kiwi traders will now look for broader risk sentiment to play a key role. The US Initial Jobless Claims data and ISM Philadelphia Fed Manufacturing Survey for November will also be eyed for some trading incentives.

NZD/USD technical levels