Many of the expectations heading in to the Reserve Bank of New Zealand’s Monetary Policy Statement and Interest Rate Decision was that they would step away from their hawkish stance and lean a little more toward the doves. The genesis of that line of thought is largely due to the European Central Bank and their institution of Quantitative Easing which is having ripple effects throughout the monetary policy making world. Merely one hour earlier though, the Federal Reserve appeared stoic in their decision to remain on the same monetary path as last month, adding that they are watching international developments without going in to detail. The RBNZ on the other hand, made a significant enough change to impact their currency negatively.
The main change that they made was to include the line: “In the current circumstances, we expect to keep the OCR on hold for some time.” This differs from the previous statement in that the RBNZ was much more stubborn and took what was believed at the time to be an unnecessarily hawkish stance by saying: “Some further increase in the OCR is expected to be required at a later stage.” They also conceded that inflation could fall in to negative territory “for a period before moving back towards 2 percent, albeit more gradually than previously anticipated.”
Despite the widespread belief that the RBNZ would be backing away from their hawkish platitudes, as evidenced by the NZD/USD dropping nearly 500 pips since January 15th, most didn’t anticipate an acknowledgement of potential deflation. If the RBNZ is publicly stating their expectation of such dismal inflation, then the next logical conclusion would be that they are also considering cutting interest rates to get ahead of that potential issue; a priming of the pumps, if you will. In response, the NZD is falling against all other currencies as investors begin to prepare for potential future action from the RBNZ.
General Risk Warning for stocks, cryptocurrencies, ETP, FX & CFD Trading. Investment assets are leveraged products. Trading related to foreign exchange, commodities, financial indices, stocks, ETP, cryptocurrencies, and other underlying variables carry a high level of risk and can result in the loss of all of your investment. As such, variable investments may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall Witbrew LLC and associates have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to investment trading or (b) any direct, indirect, special, consequential or incidental damages whatsoever.
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.