- Earlier on Tuesday, the NZD / USD briefly rose above 0.7000 for the first time since mid-2018, with sentiment fueled by the news about the RBNZ.
- However, amid a broad rally in the USD, the pair has pulled back, but remains supported above 0.6950.
Amid a broad recovery in the USD, the NZD / USD has retreated from Monday’s European morning session highs above the 0.7000 level, which by the way is the highest the pair had been since June 2018. The NZD / USD remains above 0.6950 for now and continues to trade with solid gains on the day of over 30 pips or 0.5%. However, the NZD is no longer the best performing G10 currency, having been overtaken in recent trading by the AUD and NOK amid a widespread rally in global commodities (i.e. metals and crude oil). ), and since the MSCI World Equity Index hit record highs.
NZD Traders Ahead of Including House Prices in RBNZ Inflation Mandate
The New Zealand dollar rose overnight after the New Zealand government floated the idea of altering the Bank of New Zealand’s inflation mandate to include inflation in house prices. Given that house price inflation has been significantly above consumer price inflation in recent years, its inclusion in the RBNZ’s headline inflation mandate would mean that the bank would have less scope to relax policy ( hence the rise in the NZD).
Keep in mind, however, that any decision on this is not final, with New Zealand Finance Minister Grant Robertson currently “seeking advice” on the RBNZ issue (Robertson sent a letter to RBNZ Governor Adrian Orr, asking for advice on the matter). Governor Orr’s advice is likely to be “no,” as he responded to the story by commenting that the RBNZ “already considers asset prices and that monetary and financial policies alone cannot solve property problems.” Governor Orr will speak again at 22:00 GMT following the release of the RBNZ’s Biennial Financial Stability Report and may offer more information on the matter.
Given the RBNZ’s opposition to the idea, it might be a bit risky to expect that including house prices in the RBNZ’s inflation mandate is right around the corner. This could explain why the NZD has dropped in the G10’s rankings in recent trading, anyway.
NZD / USD briefly forays above long-term uptrend resistance
Earlier Tuesday, before the broad USD rally that saw NZD / USD slide towards 0.6950, the pair managed to briefly advance above a long-term uptrend linking June 10, 22, 23, 27, 28 and July 31 and highs of September 2. With the pair also breaking the psychologically important 0.7000 level for the first time in more than two years, the door has been opened for a test of the next significant resistance area around 0.7050 (the highs of June 2018).
To the downside, if the USD rally can continue, the main support area is fully down around the 0.6800 mark (the highs of September 2 and 17).
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