The RBNZ kept the Overnight Cash Rate (OCR) on hold in line with consensus at 5.50% but the accompanying Monetary Policy Statement (MPS) read less hawkish than its Nov'23 MPS.

The Bank has set a very high bar to act. We now expect the RBNZ to remain on hold till May next year when it starts cutting.

Markets were likely positioned for a hawkish RBNZ judging by the bids in NZD over the past two weeks, but the lack of any hawkish bias would likely see NZD retrace the bulk of its recent gains.

In the near term, NZD/USD could revisit the 100-DMA and 200-DMAa at 0.6093 and 0.6077 respectively.

After the red-hot run, equities may be due for a pullback as the earnings season wraps up, which poses downside risk to NZD.