The New Zealand dollar is down 1% on Wednesday, after the Reserve Bank lowered interest rates today. NZD/USD is trading at 0.6017 in the European session at the time of writing.
RBNZ lower rates for first time in four years
The Reserve Bank of New Zealand had investors on edge right up to the wire of today’s rate announcement. It was unclear whether the RBNZ would continue to hold rates or take the leap and cut rates for the first time since March 2020. In the end the central bank reduced the cash rate by 25 basis points to 5.25%.
The RBNZ statement said that inflation expectations, headline and core inflation “are moving consistent with low and stable inflation”. The statement added that although services inflation remains high it is expected to continue to decline and CPI is expected to remain around the 2% midpoint of the 1-3% target in the foreseeable future.
The RBNZ signaled that it plans to continue cutting rates, with its forward guidance suggesting once more cut prior to the end of the year and three or more cut by mid-2025. This was a far more aggressive projection than in May, when the RBNZ said that initial rate cut was unlikely before mid-2025. The RBNZ minutes noted that “the economy is contracting faster than anticipated”.
The message from today’s meeting is that the central bank is satisfied with the inflation picture and is ready to cut rates aggressively, which is a significant shift in policy. The New Zealand dollar has reacted with losses and fell as low as 1.2% earlier today, erasing the gains seen on Friday.
NZD/USD technical
-
NZD/USD has pushed below support at 0.6059 and is testing support at 0.6036. Next, there is support at 0.5994.
-
There is resistance at 0.6101 and 0.6124.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
GBP/USD holds gains near 1.3100 after dismal UK data
GBP/USD struggles near 1.3100 in European trading, unable to add to the latest gains after the dismal UK data. The UK economy stagnated in July again while the Industrial Production also unexpectedly declined, checking the Pound Sterling's upside. US CPI is next in focus.
EUR/USD trades with moderate gains near 1.1050, US CPI awaited
EUR/USD is holding the bounce near 1.1050 in Wednesday's early European session. The pair draws support from the USD/JPY slump-driven US Dollar weakness. The further upside may be limited due to dovish ECB expectations. All eyes now turn to US CPI data.
Gold buyers try their luck again heading into US inflation showdown
Gold price is consolidating a two-day uptrend above $2,500 in Wednesday’s Asian trading. Gold buyers take a breather, with the next directional move likely triggered by the critical US Consumer Price Index data due later this Wednesday.
Bitcoin breaks above $56,000 resistance level
Bitcoin price approaches a critical support level; if it holds, it might pave the way for further recovery. However, Ethereum and Ripple find rejection around their resistance level and could be poised for declines, diverging from BTC’s potential rebound.
Five Fundamentals for the week: Jittery markets fear the ECB, US inflation and more Premium
Is there still a chance? Investors hope for a 50-bps rate cut from the Fed but also fear a global recession is underway. The world's three largest economies, the US, China, and the eurozone, are set to rock global markets.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.