The Reserve Bank of New Zealand (RBNZ) will hold its monetary policy meeting tomorrow. Economists anticipate a 25 basis point increase in the key interest rate to 5.00%. After this, RBNZ officials will likely take a pause in the current policy tightening cycle to evaluate the results of 11 consecutive interest rate hikes launched in October 2021 when the rate was at the level of 0.25%.

Despite high levels of inflation in the country, the regulator may have to forego further rate hikes, especially in light of an impending recession and a sharp increase in internal migration.

The latest report from the New Zealand Institute of Economic Research (NZIER) also expects a 25 basis point increase in the interest rate "given that inflationary pressures in the economy remain high and inflation expectations remain above the Reserve Bank's inflation target range of 1%-3%". NZIER also recommends that RBNZ officials" pause the official cash rate (OCR) increases after April but keep it elevated for some time to bring inflation down" taking into account the increased risk of an impending recession.

Therefore, it is logical to assume that if RBNZ follows through with its decision tomorrow, the New Zealand dollar may come under pressure. However, its dynamics are likely to be similar to those of the Australian dollar today which declined moderately after the Reserve Bank of Australia announced its decision to pause rate hikes.

Meanwhile, the US dollar continues to stay under pressure, as evidenced by the mixed dynamics of its index, DXY, which was able to retest a 9-week low of 101.46 at the beginning of today's European trading session.

The ISM report released on Tuesday showed that business activity in the US manufacturing sector continued to contract at an accelerated pace in March. The PMI business activity index in the manufacturing sector fell to 46.3 compared to 47.7 in February and a forecast of 47.5. A similar indicator from the S&P Global slipped to 49.2 from 49.3 in March, still remaining below the 50.0 level, which separates business activity growth from a slowdown. The new factory orders index in the manufacturing sector presented in yesterday's ISM report also declined in March to 44.3 versus 47.0 in February and a forecast of 44.6.

Tomorrow, a batch of important macroeconomic data will be published in the US.

As for the NZD/USD pair, at the time of the publication, it was trading near the 0.6295 level, showing a mixed dynamic ahead of tomorrow's RBNZ meeting. Overall, the pair is moving within an upward short- and medium-term trend while remaining within the global downward trend. To continue its upward momentum, the pair needs to overcome the strong resistance level of 0.6305.

Regarding events important for the NZD/USD pair, it is worth paying attention to the publication of manufacturing orders data in the US for February at 14:00 GMT and the dairy price index after 14:00 GMT. The dairy price index reflects the weighted average price of 9 dairy products sold at an auction organized by Global Dairy Trade (GDT) as a percentage. The New Zealand economy is still largely characterized by its commodity exports, with the majority of them being dairy and animal products.

Therefore, another decline in global dairy prices from the previous values ( -2.6%, -0.7%, -1.5%, -0.1%, -2.8%, -3.8%) may have a negative impact on the NZD quotes.