NZD/USD is trading at its highest level in a month above 0.6770 boosted by the Reserve Bank of New Zealand's (RBNZ) hawkish policy outlook. In the view of economists at Danske Bank, this policy announcement has positive implications for NZD/USD.

A hawkish hike

“RBNZ hiked interest rates by 25bp, but signaled that more aggressive tightening may be needed. In terms of balance sheet, RBNZ will begin 'active QT' and it plans to sell bonds from its portfolio in addition to not reinvesting maturing investments.” 

“While RBNZ decided against a 50bp this time, they clearly signaled that it could come at a later stage, and also lifted the endpoint of the rate path.”

“While the geopolitical tensions' impact on commodities remains the key driver for NZD in the near-term, markets have not discounted much more than 25bp per meeting going forward, leaving further upside potential for NZD.”