New Zealand dollar rises after interest rate decision

Reserve bank of New Zealand surprises markets by raising interest rates in meeting today

By Raed Alkhedr | @raedalkhedr | 5 April 2023

Midday Market update
  • Gold stabilizes above $2000

  • The pound sterling rises after warnings about inflation rates

  • The New Zealand dollar rises after interest rate decision

Gold regains its shine and surpasses the $2,000 mark

The precious metal witnessed a sharp increase during Tuesday's trading, benefiting from the decline in the US dollar index, reinforcing its gains and surpassing the $2,000 mark. At the start of today's trading, the yellow metal continued its upward trend, maintaining the series of increases it has experienced since the beginning of the week, trading near levels of $2,025 per ounce.

The JOLTS Job Openings data had a negative impact on the movements of the US dollar. The US Labor Office reported a negative US job vacancy index, with an increase of approximately 9.93 million jobs in February, compared to the previous index reading of 10.82 million jobs in January.

These events are unfolding as the market awaits important economic data to be released later today, including the ISM Services Purchasing Managers' Index, Non-Farm Employment Change, and US labor market data, which are scheduled to be released on Friday.

Reserve bank of New Zealand surprises markets with interest rate hike

In a surprising move for the markets, the Reserve Bank of New Zealand raised interest rates by 50 basis points in its second meeting this year, exceeding expectations that the interest rate would only be raised by a quarter of a percentage point. The main interest rate is now 5.25%.

Following the announcement, the New Zealand dollar saw a noticeable increase against the US dollar by about 0.60%, trading near levels of 0.6350.

Last month, data showed a contraction in New Zealand's gross domestic product in the fourth quarter of 2022, with a contraction of about 0.6%, while the previous reading recorded growth of 1.7%. This interest rate hike comes as a surprise amidst this economic context.

GBPUSD rises amid warnings of inflation rates

Since the beginning of the week's trading, the pound sterling has increased against most major currencies, benefiting from expectations that the Bank of England will continue to tighten monetary policy.

In today's trading, the pound sterling started with a slight increase against the US dollar, trading at $1.2508.

Huw Pill, a member of the Bank of England, warned about evaluating inflation expectations in Britain, indicating that there are still supporting factors for the current high inflation to continue. He emphasized that the Bank of England will make its next interest rate decision based on the data released.

Governor of the Bank of England, Andrew Bailey, has also indicated that the bank is closely monitoring any signs of inflationary pressures and is prepared to further tighten monetary policy if inflation rates continue to rise. This has contributed to the pound sterling's recent increase.