RBNZ's less hawkish tone and its ripple effect on CAD crosses
Caught the RBNZ statement earlier today, and it was definitely less hawkish than some were positioning for. The market was pricing in a higher probability of another hike, but the dovish hold has clearly taken some steam out of the NZD. We saw $NZDCAD immediately react, pushing up to 0.81793 from its earlier dip. The high today around 0.81846 shows the initial pop.
Now, the question is how much follow-through this has. The BOC's stance has been pretty consistent on inflation, and with oil prices still somewhat elevated, I'm thinking the CAD might find some underlying support. If this RBNZ sentiment really takes hold, we could see the $NZDCAD continue to retrace. Keeping an eye on the 0.8200 level; a clear rejection there would strengthen the case for a move lower. On the flip side, if we break through and hold, it might signal that the market is already looking past this particular central bank read.
Agree, the dovish hold was a surprise to many who were still betting on another hike. It will be interesting to see if this shift in RBNZ's stance has a lasting impact on CAD crosses or if it's more of a temporary rebalancing after the initial reaction.