NZD Update

The RBNZís decision to raise the OCR rate this morning came as no surprise. They put in place a 25 basis point hike taking the OCR to 2.75%.

Further rate rises are still on the cards over the coming months.

RBNZ Governor Alan Bollard, said there were economically speaking signs of a sustained recovery and that New Zealandís main trading partners were faring better than most which went some way to offset the problems occurring in Europe.

The Reserve Bank also released a slightly revised economic growth forecast for the coming year Ė predicting 3.5% growth in 2011 which was fractionally down on the 4% figure released in March.

Sterling NZ Dollar still remains in the GBPNZD 2.1 to 2.2 bracket that it has by and large been settled in for four months now. The past week has seen some upward momentum in favour of the pound and the upper end of the band was tested however we are now back down in the middle of the range (GBPNZD 2.16) and the NZ Dollar should gather some support from todayís OCR decision which will restrict Sterling from making any further gains at least for the next 24 hours.

The general trend over the past week has been more down than up for this pairing. Despite the all important Non Farm Payrolls figures for the US last Friday coming out worse than expected the greenback has tested levels that the pairing hasnít seen since August last year ie below the NZDUSD 0.66 support level. In the past couple of days the NZ dollar has made a small recovery putting it back above 0.67 and todayís Reserve Bank OCR hike will support that momentarily.

The Euro garnered some strength off the back of the past weeks US negative data but the trend is still downward for this pairing and coupled with ongoing problems coming out of the Eurozone that trend is likely to continue.