RBNZ: firmly on hold despite higher oil - Westpac

Ross J Burland FXStreet

With respect to the RBNZ and the OCR, analysts at Westpac acknowledged that rising oil prices, a lower NZD and higher fuel taxes have conspired to see petrol prices at the pump increase to as much as $2.50/litre in some locations.

Key Quotes:

"This will contribute to CPI inflation, which we expect will increase above the RBNZ’s 2% target midpoint early next year before moderating."

"The inflationary impact of petrol price increases tends to be transitory, and the RBNZ will look through it."

"However, growth impacts matter too."

"Higher petrol prices will boost costs for already downbeat businesses, and it will also squeeze the discretionary purchasing power of households. Households lack savings buffers to absorb unexpected events – be that something as dramatic as job loss or as everyday as petrol price movements."

"Given businesses are already downbeat, a spooked consumer to boot could make quite a dent in the economic outlook. Therefore higher petrol prices are unlikely to make the RBNZ any more eager to hike the OCR."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.