RBNZ overview
The Reserve Bank of New Zealand (RBNZ) will announce the monetary policy decision at 02:00 GMT today. The central bank is expected to cut interest rates to a fresh record low and signal readiness to do more.
The RBNZ will lower the official cash rate (OCR) by 25 basis points to 1.25%, according to 18 of 25 economists polled by Bloomberg earlier this week.
Analysts in Australia and New Zealand Bank have affirmed the market consensus of a rate cut ahead of the event by saying:
“The RBNZ said in June that a lower OCR “was likely to be necessary” and that risks were “tilted to the downside”. Data since then has confirmed this.”
Market priced for 25 basis point rate cut
The NZD/USD pair dropped from 0.6791 to 0.6448 in 12 trading days to Aug. 5 due to escalating Sino-US trade tensions and dovish RBNZ expectations.
Impact on NZD/USD
With the rate cut likely priced in, the focus will be on the forward guidance. The central bank may revise lower its interest rate forecast for 2019.
NZD/USD will likely take a hit if the central bank cuts rates and revises lower the forecast for OCR to 1%. The kiwi could find some love if the RBNZ cuts rates by 25 basis points, but refrains from signaling further easing, although the RBNZ has little room to sound hawkish, as global central banks moving toward additional easing.
As of writing, NZD/USD is trading at 0.6542, representing moderate gains on the day. The currency pair carved out a Doji candle on Tuesday, having dropped from 0.6791 to 0.6448 in the preceding 12 days.
The Doji candle represents seller exhaustion and indicates scope for technical recovery. That said, a bullish Doji reversal would be confirmed only if the pair closes today above 0.6590 (Doji candle's high). That could happen if the RBNZ sounds less dovish-than-expected.
About the RBNZ interest decision and statement
The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.
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