When is the RBNZ and how might it affect NZD/USD?
|RBNZ overview
The RBNZ is expected to leave the Official Cash Rate (OCR) at 1.75% at its policy meeting today on the hour while markets look for potential changes in language from the governor of the Central Bank, Adrian Or's August MPS.
Analysts at ANZ expect that the RBNZ will reiterate its previous neutral messaging, saying that the next move could be “up or down” – or words to that effect:
"However, our base case is that the OCR track will be little changed, with eventual increases late in the projection. In some ways, this difference between messaging and projection presents an awkward tension. But in our view it simply reflects a distinction between forecasting and policy strategy. The OCR projection is based on a set of assumptions that could (and will) prove to be wrong – such is the nature of forecasting. On the other hand, the RBNZ’s neutral messaging is about caution in light of uncertainty, sending the clear message that the RBNZ is willing to do whatever is necessary should developments change. We expect this caution to be a continued theme of today’s MPS in light of recent events. The outlook for activity is weaker, but the outlook for CPI inflation is stronger. We expect that the RBNZ will “look through” temporary movements in CPI inflation; instead focusing on the trend in inflation provided inflation expectations remain anchored – which yesterday’s figures show they are. Core inflation has been creeping up, but remains below target and is expected to increase only gradually from here. This speaks to a world where wait-and-see remains the best approach."
RBNZ OCR Review and Monetary Policy Statement (MPS):
Once the OCR is left at 1.75% as widely expected, all eyes on the RBNZ's projected OCR path in the MPS. Some look for a delay in the +10bp signal from Q3 2019 into 2020, but we don't think such a signal is necessary, and look for no change in guidance. Orr so far is a communication wildcard, making the press conference mandatory viewing for NZD investors.
Analysts at TD Securities explained.
How could the RBNZ affect NZD/USD?
Key resistance remains located at 0.6860 but for the near term, 0.6750, 0.6770 where the 200-hr SMA is located, just below 0.6780 where the 100-4hr SMA is locted come first. Should bulls manage of the recent highs and the top of the channel, with daily closes, 0.6920 as the June high comes as a key level. The 200-month moving average resistance is at 0.7020. To the downside, and the most favoured outcome, the 0.6720 support opens the 1st July lows of 0.6689 and 0.6616 further down. Further out, 0.6550 then guards a run to the 0.6470s. However, interest rate markets are unlikely to be perturbed by a steady–as–she–goes outcome. However, anything remotely hawkish from the Governor's one-page statement would likely give the bird some much-needed relief.
Key notes:
About the RBNZ interest decision and statement
The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.
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