New Zealand Dollar Talking Points:
- New Zealand Dollar is priced in for some intense price action over the coming days
- The currency may rise on the RBNZ rate decision before falling on April’s US CPI
- NZD/USD downside momentum is slowing warning that prices may turn higher next
The New Zealand Dollar might be getting ready to push higher against its US counterpart and prices may pause on near-term options-derived resistance. Looking at the table below, NZD/USD one-day implied volatility is at its highest since the lead-up to the New Zealand minority coalition government announcement back in October 2017. The similar one-week measurement is at its largest since March. A couple of key event risks that are coming up may explain why intense price action is priced in.
Implied Volatility and Market Range for the FX Majors
The immediate one is the upcoming RBNZ monetary policy announcement. There, rates are widely anticipated to remain unchanged at 1.75% which means the central bank’s forward guidance could be what fuels New Zealand Dollar volatility. On this front, there may be scope for Kiwi Dollar gains if their new governor Adrian Orr reemphasizes that long-term inflation expectations are still anchored to 2 percent.
Looking at the immediate chart below, you can see that NZD/USD’s decline since April has also been accompanied with decreasing local inflation estimates