Not for the first time, the Adrian Orr-led RBNZ caught the market off-guard, by not retaining a dovish bias when they left the OCR at 1.0% as expected nAZN006H2V.
The RBNZ made it clear they expect the economy to benefit from fiscal spending and if their projections hold up, they will remain on hold for the rest of 2020.
The NZD/USD reacted to the RBNZ statement by jumping over 1.0% to 0.6475.
The market was also a bit surprised the RBNZ and Orr looked past the threat of the coronavirus, expecting the negative impact on the economy to be limited to the first half of 2020, with activity seen improving in the second half.
At his press conference, Orr said the RBNZ was assuming a six-week disruption from the coronavirus nW9N29B03L. Yet the RBNZ wasn't dismissive of the threats posed by the virus and said they would make the necessary adjustments if its impact proved more persistent than they were expecting nL4N2AB0F2.
The relatively upbeat RBNZ outlook will likely keep the NZD/USD supported in the short term and a test of the 200-day MA at 0.6500 is likely.
A break above the 38.2 Fibonacci of the 0.6755-0.6378 move at 0.6522 would signal the end of the downtrend that has been in place since the start of the year.
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