NZD/USD jumps to near 0.6240 as RBNZ hikes OCR by 50 bps to 4.75%

• NZD/USD has scaled firmly to near 0.6240 as the RBNZ has hiked its OCR by 50 bps to 4.75%.
• A promise of a cyclone relief package from NZ Hipkins could propel inflationary pressures further.
• The USD Index will dance to the tunes of the FOMC minutes release.

The NZD/USD pair has witnessed a significant buying interest as the Reserve Bank of New Zealand (RBNZ) has adopted a hawkish tone on interest rates. RBNZ Governor Adrian Orr has hiked the Official Cash Rate (OCR) by 50 basis points (bps) to 4.75%. A decision of 50 bps interest rate hike was widely anticipated. Investors should note that the RBNZ announced a 75 bps rate hike in its November monetary policy meeting.

A bumper rate hike was already expected by the RBNZ as the central bank has failed in easing the Consumer Price Index (CPI) in the New Zealand economy significantly. Inflationary pressures in the NZ economy have not peaked yet while the labor market has started demonstrating devastating effects due to the continuation of policy tightening by the RBNZ.

Meanwhile, the fresh release of the helicopter money as New Zealand Prime Minister (PM) Chris Hipkins has promised a cyclone relief package of NZ$300 million ($187.08 million), carries the potential of propelling inflationary pressures further.

Going forward, the monetary policy statement will dictate whether the RBNZ retains the target of a 5.5% OCR peak by May.

In the early Asian session, Statistics New Zealand released January's exports and imports figures. Exports were lower at $5.47B against the prior figure of $6.72B while Imports were higher than their former release. This indicates that the domestic demand is extremely robust.

Investors' risk appetite is improving as risk-perceived assets are gaining some strength, however, the caution still persists as investors have started discounting Federal Reserve’s (Fed) interest rates to 5%. The US Dollar Index (DXY) is facing barricades in overstepping the critical resistance of 103.90. Going forward, the USD Index will dance to the tunes of the Federal Open Market Committee (FOMC) minutes release.