Arnaud Masset
Swissquote Bank Ltd
After extending gains on hope that the RBNZ would adopt a more positive on the inflation outlook, the Kiwi fell sharply on Thursday morning and reached its lowest level in more than two years (lowest since March 2016). After climbing as high as $0.6762 yesterday, NZD/USD slid 1.33% this morning to $0.6655 after the Reserve Bank of New Zealand adopted a more dovish stance. As broadly expected the monetary institution maintained the Official Cash Rate at record low 1.75%. However, investors didn’t expect that Adrian Orr would delayed the timing for the next rate hike. The RBNZ is now expected to wait until the third quarter of 2020, which corresponds to a delay of one year compared to the May forecast. In addition, Governor Orr said that the RBNZ leaves the door open for a rate cut, should the situation warrant it.
The RBNZ’s dovish turn wasn’t expected by most market participants, which explains why the Kiwi is having a rough day. Nevertheless, Governor Orr also said that the RBNZ was finally “pleased” with current level of the Kiwi, which suggests that the downside is limited. In the medium-term, we do not rule out further weakness of the Kiwi towards the 0.66-0.65 support area. However, we remain positive in the longer-term as we believe the Kiwi is approaching oversold territory.
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This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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