The RBNZ meeting is tomorrow and their last known direction was for negative interest rates for New Zealand in 2021. So, what else can we expect from the RBNZ tomorrow?

Funding for Lending Programme (FLP)

Governor Orr should release details of a new tool, called the Funding for Lending Programme (FLP) tomorrow. The programme is designed to provide cheap loans to banks so they, in turn, can further reduce lending rates for customers. Some economists see this being entirely focused on business lending so it boosts economic activity rather than house prices.

Why this tool now?

This funding tool itself is seen as an important precursor to negative interest rates. The thinking behind this is that if the RBNZ do decide to take the official cash rate negative next year the FLP rate would also fall with it. This would mean that banks can directly pass the cut on to customers.

Will interest rates still go negative?

The consensus amongst New Zealand economists is that the RBNZ is to cut -0.50% in 2021. At this stage, negative rates are still expected. However, several economists think the bank will hold back from rate projections tomorrow in order to avoid being pinned down. The situation could easily have changed sufficiently for the RBNZ to walk back from using Negative Interest Rates. On Monday the RBNZ shadow board met. This board is put together by the New Zealand Institute of Economic Research. The shadow board sees less need for further stimulus. The need to go negative was seen as now reduced. See here for more info.

What’s the trade outlook?

This depends on the direction that the RBNZ take out of their meeting.

If the RBNZ still look like using negative rates

Well, last week the RBA kept rates on hold and said that the current 0.10% level was pretty much the bottom rates will go in Australia. So, if a divergence opens up and the RBNZ is still moving towards negative rates then an AUDNZD buy from pullbacks would be one obvious outlook. However, if the RBNZ are more optimistic and walk back from negative rates, then that changes the AUDNZD outlook to neutral.

AUDNZD

If the RBNZ walk back from using negative interest rates

However, a neutral RBNZ potentially opens up an NZDUSD buy on pullbacks as the NZD dollar should boost higher on an optimistic RBNZ against a weakened dollar post-Biden victory.

Learn more about HYCM

High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

AUD/USD fades an uptick above 0.7400 despite upbeat China's PMIs

AUD/USD pares gains and drops back below 0.7400 amid a cautious market mood, reflected by the losses in the S&P 500 futures. Australian-Sino trade tussle outweighs the vaccine optimism and upbeat Chinese NBS PMIs. 

AUD/USD News

EUR/USD: Refreshes three-month high towards 1.2000, battles triangle resistance

EUR/USD eases from fresh high since September 01. The pair rose to the highest in three months before a few hours but couldn’t cross the upper line of a five-week-old ascending triangle formation. RSI conditions warrant caution, bears are less likely to take entries above 1.1870.

EUR/USD News

NZD/USD refreshes 2.5-year high on strong China PMI above 0.7400

NZD/USD rises to the fresh high since June 2018 after China data. China’s NBS Manufacturing PMI, Non-Manufacturing PMI beat market forecasts in November. ANZ Business Confidence, Activity Outlook also came in positive for November.

NZD/USD News

Gold: Trades below 200-day MA for first since March

Gold is trading below the widely-followed 200-day Simple Moving Average (SMA) for the first time since March. The metal is changing hands near $1,783 per ounce, representing a 0.25% loss on the day. 

Gold news

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex Majors

Cryptocurrencies

Signatures