RBNZ Cuts, RBA Looks on
|As the RBNZ delivered its widely anticipated 25-bp rate cut to 2.00%, NZD made the “expected” jump, before settling lower following dovish comments from RBNZ governor Wheeler. Asserting its concern with sustainable decline in inflation and greater than expected moderation in wage growth, the RBNZ has explicitly opened the door for further easing in the coming months. As those statement failed to lower the value of the currency, Wheeler decided clear the air by stating “we want to see the currency fall” as the cat-&-mouse with the RBA continues with neither central bank want to see its currency rise appreciably.
Both central banks have frustratingly seen their currency rise appreciably due to: i) stabilisation in commodities and China market metrics; and 2) Fed keeping rates unchanged. A rate cut of at least 25-bps this year from of the two each central bank is a foregone conclusion in the event of no Fed hike this year, while the macro dynamics as well as market sentiment in China will be instrumental in gauging the moves from the RBA. Another reason the RBNZ has little choice but to cut some more is the planned macro-prudential measures set for September by the RBNZ, aimed at slowing speculative interest in the hot housing market. Such move would remove a crucial obstacle to interest rate cuts and will keep the RBA-RBNZ battle for the lowers well alive.
Ahead of this evening's RBNZ move, we issued a tactical NZD trade in addition to the AUDNZD existing long.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.