NZD/USD jumps to nearly two-week highs at 0.5780 after RBNZ rate hike to 3.5%

• NZD/USD has reached 0.5780 after the RBNZ raised interest rates by 50 basis points.
• RBNZ interest rates have risen to 3.5% and the central bank remains on target for price stability.
• The DXY is expected to leave the immediate cushion of 110.00 after the weak projections for the NFP.

The NZD/USD pair has picked up significant bids and hit an intraday high of 0.5780 as the Reserve Bank of New Zealand (RBNZ) has raised its Official Cash Rate (OCR) by 50 basis points (bps) for fifth time in a row. The magnitude of the rate hike is in line with the forecasts of institutional investors. This has brought the OCR to 3.5%.

Price pressures in the New Zealand economy have been recorded at 7.3%. Therefore, the continuation of a hard-line policy was very necessary. But at the same time, the RBNZ has pushed aside growth prospects and chosen price stability as its top priority.

Meanwhile, the Dollar Index (DXY) is juggling around the 110.00 bottom and is expected to give it up amid weaker consensus for US Non-Farm Payrolls (NFP) data. Preliminary NFP estimates have been discounted by market participants. As expected, the US economy added 250,000 jobs in September, down from 315,000 in August. The US economy has been maintaining full employment levels, so there is extremely little room to create more jobs. In addition, the escalation of interest rates by the Federal Reserve (Fed) is also restricting corporations from continuing their hiring programs at full speed.

What could further dampen DXY’s appeal is data on average hourly earnings. Projections indicate a soft landing at 5.1% vs. previous release of 5.2%. Over time, when households face the headwinds of rising inflation, the lower earnings would be insufficient to offset the inflated payments.