RBNZ +50 or +75 cash rate hike this week – the larger one would prop up the kiwi $

The Reserve Bank of New Zealand meet this week, on Wednesday 23 November 2022 (local time).

Earlier:

RBNZ Shadow Board majority view is for a +75bp interest rate hike (cash rate to 4.25%)

This from Danske on the decision and the NZD
NZD

The New Zealand Dollar (NZD) is the official currency of New Zealand and the tenth most traded currency in the world. Also referred to as the Kiwi, the currency is also utilized in several Pacific islands, including Tokelau, the Cook Islands, Pitcairn islands, and Niue.The NZD’s history is long, extending back to 1934 with the creation of the Reserve Bank of New Zealand. While far from the most traded currency in the global forex market, the NZD has a key role nonetheless.The NZD is considered as a carry trade currency given it is a relatively high yielding currency. Traders typically buy the NZD and fund it with a lower yielding currency such as the Japanese yen (JPY) or the Swiss franc (CHF).What Factors Affect the NZD?Relative to the US dollar or British pound, the NZD can be much more volatile and dependent on external economic stress or turmoil.Investors with risk appetite often buy the currency, while market fears and crises place negative pressure on the NZD.There are also several factors that can specifically drive the NZD in the forex market. This includes dairy prices as New Zealand is the largest exporter of whole milk powder in the world. A rise in milk prices can lead to spikes in the NZD. By extension, tourism numbers are also important to the NZD.This is due to New Zealand being dependent on tourism as a sizable proportion of its economy. Growing tourism would indicate a higher NZD, and vice versa.

The New Zealand Dollar (NZD) is the official currency of New Zealand and the tenth most traded currency in the world. Also referred to as the Kiwi, the currency is also utilized in several Pacific islands, including Tokelau, the Cook Islands, Pitcairn islands, and Niue.The NZD’s history is long, extending back to 1934 with the creation of the Reserve Bank of New Zealand. While far from the most traded currency in the global forex market, the NZD has a key role nonetheless.The NZD is considered as a carry trade currency given it is a relatively high yielding currency. Traders typically buy the NZD and fund it with a lower yielding currency such as the Japanese yen (JPY) or the Swiss franc (CHF).What Factors Affect the NZD?Relative to the US dollar or British pound, the NZD can be much more volatile and dependent on external economic stress or turmoil.Investors with risk appetite often buy the currency, while market fears and crises place negative pressure on the NZD.There are also several factors that can specifically drive the NZD in the forex market. This includes dairy prices as New Zealand is the largest exporter of whole milk powder in the world. A rise in milk prices can lead to spikes in the NZD. By extension, tourism numbers are also important to the NZD.This is due to New Zealand being dependent on tourism as a sizable proportion of its economy. Growing tourism would indicate a higher NZD, and vice versa.
Read this Term.

This is via the folks at eFX.

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• Danske Research discusses the expectations for next week’s RBNZ policy meeting.
• “Next week, antipodean markets will focus on the RBNZ meeting on Wednesday, where in contrast to other G10 central banks, consensus expects RBNZ to up the hiking pace to 75bp (from 50bp) amid the recent upticks in both realized inflation
  Inflation
  
  Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
  
  Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
  Read this Term and inflation expectations,” Danske notes,
• “Markets are evenly divided between 50 and 75bp, so the larger hike could provide some temporary support for NZD FX,” Danske adds.

This snapshot from the ForexLive economic data calendar, access it here.