- NZD/USD depreciates as traders adopt caution ahead of RBNZ interest rate decision on Wednesday.
- NZIER shadow board members recommend that the RBNZ maintain the OCR at 5.50%.
- The decline in the Treasury yields puts pressure on the US Dollar.
NZD/USD continues to lose ground for the second consecutive day, trading around 0.6120 during the early European hours on Tuesday. This decline could be attributed to the traders’ caution ahead of the Reserve Bank of New Zealand's (RBNZ) interest rate decision on Wednesday.
The Reserve Bank of New Zealand is anticipated to maintain the Official Cash Rate (OCR) at 5.50% during its July meeting on Wednesday, despite indications of a slowing economy in New Zealand. Traders will likely monitor the Monetary Policy Statement for further insights.
The New Zealand Institute of Economic Research (NZIER) shadow board members recommend that the central bank keep the OCR unchanged at the upcoming Monetary Policy meeting. The current weaker growth, slack labor market, and ongoing easing of annual CPI inflation indicate that previous cash rate increases are successfully reducing inflationary pressures in the New Zealand economy.
On the USD’s front, Treasury yields face challenges due to growing speculation that the Federal Reserve (Fed) may cut interest rates in September, potentially capping the upside for the US Dollar. The CME's FedWatch Tool shows that rate markets price in a 76.2% probability of a rate cut in September, up from 65.5% just a week ago.
Federal Reserve Chairman Jerome Powell will deliver his testimony on "The Semi-annual Monetary Policy Report" to the US Congress on Tuesday. Powell could provide a broad overview of the economy and monetary policy, with his prepared remarks being published ahead of his appearance on Capitol Hill.
(This story was corrected on July 9 at 08:00 GMT to say, in the fifth paragraph, that "Fed Powell will deliver his testimony on "The Semi-annual Monetary Policy Report").
Economic Indicator
RBNZ Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.
Read more.Next release: Wed Jul 10, 2024 02:00
Frequency: Irregular
Consensus: 5.5%
Previous: 5.5%
Source: Reserve Bank of New Zealand
The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.
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