RBNZ Survey Threatens to Break NZD/USD Calm
The New Zealand dollar has been remarkably quiet in August, but this calm may be short-lived. The upcoming release of the RBNZ Survey of Expectations could provide a catalyst for traders to act. This survey has historically carried significant implications for interest rates and is closely watched by markets.
Two-year inflation expectations are the key number to watch in the survey. A meaningful deviation from the current level of 2.53% could have a substantial impact on Kiwi rates and currency.
The RBNZ has priced in an aggressive monetary policy tightening cycle, with implied pricing indicating a high probability of further hikes. However, a decline in inflation expectations, particularly back towards the RBNZ's 2% target midpoint, could force traders to reevaluate their positions and weigh on the Kiwi as a result.
The NZD/USD pair has been subdued, with volatility sitting near two-decade lows. A break below 0.5860 would open the door for a deeper retracement towards the 50-day moving average, while a move above 0.5900 could encourage bulls to look for a run towards 0.5992.