NZD/USD decouples from S&P 500: what's next for the Kiwi?
The New Zealand dollar (NZD/USD) has been one of the poorest performing major currencies in recent months, losing approximately 7% versus the dollar since mid-March and closely tracking the decline in global equities markets.
The 30-day correlation between the NZD/USD pair and the S&P 500 index was nearly equal to one in May, but it has recently began to fall.
The kiwi dollar is progressively decoupling from its strong link with investor risk appetite, owing to interest rate hikes and the fact that USD strength is running out of steam due to mounting concerns about a US economic downturn.
Today, the Reserve Bank of New Zealand (RBNZ) raised for the 5th time in a row its official cash rate (OCR) by 50 basis points to 2%, in line with expectations. However, the surprise came from the statement, which emphasised the need to raise the OCR quicker than expected owing to rising inflation.
New Zealand's annual inflation rate
NZIRYY surged to 6.9% in the first quarter of 2022, the highest since the second quarter of 1990, but further price pressures are expected in the months ahead.
The New Zealand dollar is poised to benefit from a more hawkish stance from RBNZ, which is ready to boost interest rates above what the market has previously priced in.
Continue reading...
The 30-day correlation between the NZD/USD pair and the S&P 500 index was nearly equal to one in May, but it has recently began to fall.
The kiwi dollar is progressively decoupling from its strong link with investor risk appetite, owing to interest rate hikes and the fact that USD strength is running out of steam due to mounting concerns about a US economic downturn.
Today, the Reserve Bank of New Zealand (RBNZ) raised for the 5th time in a row its official cash rate (OCR) by 50 basis points to 2%, in line with expectations. However, the surprise came from the statement, which emphasised the need to raise the OCR quicker than expected owing to rising inflation.
New Zealand's annual inflation rate
NZIRYY surged to 6.9% in the first quarter of 2022, the highest since the second quarter of 1990, but further price pressures are expected in the months ahead.The New Zealand dollar is poised to benefit from a more hawkish stance from RBNZ, which is ready to boost interest rates above what the market has previously priced in.
Continue reading...
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