The Reserve Bank of New Zealand surprised markets today with an unexpected 50 basis point rate hike. While the Bank was expected to increase rates today, a hike of this magnitude was unexpected. RBNZ also hinted that more tightening will come at the future meetings to respond to changing economic conditions. NZD gained following the decision but those gains were erased later on and now NZD is the worst performing G10 currency. However, this is not the end of central bank decisions for today! The Bank of Canada is set to announce a monetary policy decision today at 3:00 pm BST. Market expects a 50 basis point rate hike, with the main rate raising to 1.00%. A hawkish surprise here, for example 75 basis point rate hike, looks highly unlikely. Future guidance, however, could become more hawkish amid continued pick-up in global commodity prices. Post-meeting press conference will be held an hour after the announcement (4:00 pm BST) and CAD may experience volatility during the presser as well.
Taking a look at NZDCAD chart at H4 interval, we can see that the pair has been trading in a downward channel for some time. An upward move triggered by RBNZ rate hike was halted at the 23.6% retracement of rally launched at the end of January 2022. A break below the 0.8595 support zone, marked with a previous local high, can be observed during the European morning trade. Should BoC deliver a hawkish surprise and boost CAD, the pair may look towards the 0.8570 area as the next support.
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Source: xStation5
