According to Jane Foley, senior FX strategist at Rabobank, NZD had jumped around 1.5% vs. the USD on the back of the statement from RBNZ Governor Orr as he dismissed expectations that policy makers could be leaning further towards cutting rates this year.

Key Quotes

“While this likely sets the scene for further downside pressure on AUD/NZD, we continue to see global headwinds as leaving open a risk of a RBNZ rate cut this year and see scope for further downside pressure on NZD/USD in the coming months.”

“Today’s official policy statement states that the RBNZ expects to keep rates on hold through 2019 and 2020 and did nothing to endorse recent speculation that the central bank could be minded to ease policy.”

“The risks highlighted in the Bank’s official statement this morning point to a mixed bag. On the downside, the RBNZ stated that “trading-partner growth is expected to further moderate in 2019 and global commodity prices have already softened, reducing the tailwind that New Zealand economic activity has benefited from. The risk of a sharper downturn in trading-partner growth has also heightened over recent months”.  However, on the upside the Bank stated that low interest rates in addition to fiscal spending should support a pick-up in GDP growth in 2019.”

“In view of the offsetting nature of these risks the steady policy outlook of the RBNZ is easy to understand. That said, our view that the US/China trade wars will drag on in some form for a prolonged period coupled with signs of a broader slowdown in global growth in addition to a recent spate softer than expected domestic data tilts these risks to the downside.  We continue to favour selling rallies and look for a move towards NZD/USD 0.66 on a 3 month view.”

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