Forex Today: RBNZ Surprise Hold Sends Kiwi Lower

The RBNZ unexpectedly held rates this morning. The Monetary Policy Committee voted 4–3 to leave the Official Cash Rate at 2.75%, defying overwhelming expectations of a 0.25% increase. The majority cited lower-than-expected inflation and uncertainty over the outlook, although all members agreed that tighter policy would probably still be required. This was a surprise pause, not a declaration that the tightening cycle is over.

The New Zealand Dollar has fallen sharply. NZD/USD dropped by as much as 1.7% towards $0.5586 before recovering some ground. The Australian Dollar rose approximately 2% against the Kiwi to its highest level in 13 years. This is a particularly clear example of the importance of the gap between expectations and the actual decision: a widely anticipated hike failed to materialise, forcing a substantial repricing.

Australian inflation data has strengthened the case for another RBA hike. Third quarter trimmed-mean CPI rose by 1.0% quarterly and 3.7% annually, with the annual reading above the 3.6% forecast. September headline inflation reached 4.3%. Governor Bullock said inflation remains far too high but stopped short of committing to a move at next week’s meeting. The contrast with the RBNZ’s surprise hold has put the AUD/NZD currency cross firmly in focus.

The Federal Reserve announces its decision on rates as its policy meeting later today. Markets assign approximately a 91% probability to an unchanged federal-funds target range of 3.75%–4.00%. With a hold so strongly expected, the more important question is whether the statement and press conference reinforce expectations of a December increase, which is still widely seen as likely to happen. High energy prices remain a reason for caution about assuming that the Fed has finished tightening.

The Bank of Canada also holds a policy meeting today. A 0.25% increase to 2.50% is expected, although last week’s softer underlying inflation leaves scope for another surprise. After this morning’s RBNZ decision, traders should be especially careful about treating a strongly anticipated hike as a certainty. The ECB follows tomorrow and the Bank of Japan on Friday, with both expected to hold.

In the Forex market, the US Dollar has recovered towards a two-week high. The Dollar Index is near 102.37 ahead of the Fed meeting later today, reversing Monday’s softer picture. The Australian Dollar is benefiting from its domestic inflation news, while the Kiwi is under clear pressure. Today’s currency moves are therefore not simply a uniform Dollar advance: relative central-bank expectations are doing much of the work. The EUR/USD currency pair is moving lower with firm momentum and is very close to its 17-month low just above 1.1100. Like most trend traders, I remain short there.

Technology stocks have recovered as earnings approach. Asian equities are higher following a renewed AI-led rally on Wall Street. Results from major technology companies later today will test whether the recovery can be sustained. The rebound is encouraging, but I would distinguish renewed buying from confirmation of fresh record closing breakouts in the major US indices.

Bitcoin has reclaimed $80,000, but the recovery remains tentative. Holding above $80,000 would help preserve the broader consolidation, but the distance to the former breakout threshold near $87,293 remains substantial. It is also important to note that Bitcoin's price action has been contained within a downwards price channel for many days.

Crude Oil remains elevated despite retreating from last week’s peak. Brent is near $114.42 and WTI futures around $100.45, both modestly higher this morning. The immediate issue for speculators here is whether WTI can sustain trading around and above $100.

Gold has regained $4,000 without confirming a bullish reversal. Spot Gold is near $4,058, higher than Monday’s early level around $4,000. This recovery offers some relief after last week’s decline, but the metal remains below the $4,200 resistance highlighted previously. Gold's price action, like Bitcoin's, remains well-contained within a downwards price channel. Today’s Fed guidance could determine whether the bounce develops further or gives way to renewed selling.