When the Reserve Bank of New Zealand (RBNZ) shifts its policy stance it is usually done with full clarity and in a clear succinct way and that was certainly the case today. The RBNZ surprised markets by halting its purchase scheme next week. Subsequently, NZD/USD shot higher and recaptured the 0.70 level. The kiwi is set to remain supported, according to economists at MUFG Bank.
RBNZ shifts its stance
“The RBNZ announced that it would end QE by 23rd July while removing the previous reference to needing ‘considerable time and patience’ in order to achieve its monetary policy objectives. In May, the RBNZ had indicated that the first rate hike could come in H2 2022. That suggests scope now for a rate hike to come certainly this year.”
“We certainly should not under-estimate the extent of the shift here today. From needing to maintain stimulus to meet its objectives, the RBNZ today stated that ‘the level of monetary stimulus could be reduced to minimise the risk of not meeting its mandate’. That’s quite a shift in risks.”
“The scale of the shift today certainly provides scope for the RBNZ to move before November. 18th August and 6th October are now both live meetings and the dramatic scale of shift leads us to believe that there is a greater probability of a move in August or October that will provide further NZD support.”
“Market participants who may be reluctant to sell the US dollar may well see benefits in selling AUD/NZD given the current RBA guidance is for no rate hike until 2024. We doubt that guidance will survive too much longer but nonetheless, the RBA/RBNZ policy divergence is now even more stark. The only note of caution is that long positioning in NZD is already considerable.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.