Wellington Cable Car, the landmark of New Zealand. Image source: robertchg © 123RF.com
The Monetary Policy Committee (MPC) of the Reserve Bank of New Zealand met earlier today, and quite unsurprisingly decided to maintain the Official Chas Rate unchanged at 0.25 per cent.
The Committee also deemed it unnecessary to scale up the Bank's quantitative easing programs at the present rate. Therefore, RBNZ's Large Scale Asset Purchase (LSAP) Programme of up to $100 billion remains unchanged.
The MPC commented on the observed pick up in global economic activity, however, it also expressed concerns that border restrictions continue to pose a risk to global recovery, leading to uneven stabilisation across countries. In New Zealand, subdued inflation and sub-optimal labour market conditions continue to encapsulate this problem of uneven stabilisation.
New Zealand Inflation Rate. Image source: TradingEconomics.com
The Committee agreed that inflation and employment conditions would likely remain subdued over the medium term, which means that talks of rate hikes would possibly begin towards the fourth quarter at the earliest.
In the monetary policy statement, it was further revealed that:
"Some temporary factors were currently supporting consumer price inflation and employment. These one-off factors include higher oil prices, supply disruptions due to trade constraints, the recent suite of supportive fiscal stimulus, and a spending catch-up following the easing of social restrictions. The economic outlook ahead remains highly uncertain, determined in large part by any future health-related social restrictions. This ongoing uncertainty is expected to constrain business investment and household spending growth."
The New Zealand dollar continued with its strong performance following the release of RBNZ's statement, even though the MPC expressed concerns over some of the unfavourable ramifications from the current exchange rate.
The NZDUSD reached its strongest level since April 2018 today, with no signs of slowing down. As can be seen on the 4H chart below, the underlying price action broke out above the major resistance level at 0.73000, which serves the role of an upper boundary for the Ascending Triangle pattern, and is currently continuing to develop this breakout.
The bullish momentum is reinvigorated, as underpinned by the MACD indicator, and there are no signs of slowing down as of yet. Even though there is a possibility for a throwback to the resistance (now as a support) before the broader uptrend can be continued.
NZDUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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