Monday's NZ earthquake has proven devastating in terms of magnitude at 6.6, near the previously hit area of Christchurch. The quake was initially reported as magnitude 7.6 with aftershocks heard in the capital city of Wellington. NZD has already gapped down sharply across the board in early Monday Pacific trade with AUDNZD printing as high as 1.0760. The total cost of damage from the 2010-2011 earthquakes was estimated at NZ$15 billion – about 8% of NZ's GDP, considered twice as large in proportion in relative terms to Japan's 2011 earthquake. The bulk of damage to residential and commercial property was covered by the nation's Earthquake Commission.
Making an assessment about the NZD remains partly dependent on the extent of any subsequent aftershocks impacting urban areas as well as the subsequent response from the RBNZ. The Sep 2010 earthquake was extreme in scale rather than in casualties, but the more devastating damage to human lives and infrastructure did not occur until Feb 2011. The RBNZ responded with a 50-bp rate cut in March 2011.
How was 2011 different from today? The March 2011 rate cut was a one-time policy easing, occurring in the midst of a policy tightening cycle, which targeted mainly damage from the quake rather than a prevailing economic slowdown. Any policy action today would coincide with rates at a record low of 1.75% but with a trade-weighted NZ rate at 16% higher than in 2011. A new NZD trade has been issued earlier this evening to Premium subscribers.
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.