RBNZ overview
Early on Wednesday, the market sees the Reserve bank of New Zealand (RBNZ) monetary policy decision around 12:00 pm Sydney/10:00 am Singapore/HK/02:00 am GMT. Even if lack of quarterly economic assessment dims the charm of the event, the latest push for monetary policy easing across the top-tier central banks highlights the rate statement for fresh clues for future monetary policy moves by the New Zealand central bank.
Following latest rate-cut, the RBNZ isn’t expected to announce any change to its Official Cash Rate (OCR) during today’s meeting. However, chances of witnessing dovish statements can’t be ruled out.
Recent surveys from the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) don’t ring the alarm for the Kiwi economy while keep favoring the need for expansionary monetary policy.
TD Securities affirmed market consensus of no rate change ahead of the event by saying:
We expect the RBNZ to keep the OCR at 1.50% at tomorrow's meeting with GDP and CPI not deviating significantly from the Bank's forecasts to warrant a cut. However, we do expect the Bank to focus on downside risks which should reinforce the likelihood that the RBNZ is likely to follow up on its May rate cut possibly in August.
Elsewhere, Westpac expects no fireworks from today’s event:
All forecasters in the Bloomberg survey look for no change at 1.5%, while money markets price a 20% chance of a 25bp rate cut. A dovish statement is expected though and the 7 August meeting – which includes the quarterly MPS – is seen as highly likely to produce a cut to 1.25% (in line with Westpac Group’s view).
How could the RBNZ affect NZD/USD?
Given the recent flare-up in easy monetary policy support and a rate cut from the central bank of its largest customer Australia, the RBNZ is less likely to turn bull after announcing a rate reduction in its latest meeting. As a result, the NZD/USD pair may remain under pressure unless the central bank turns down chances of the much anticipated August rate cut.
Technically, current month high around 0.6682 and 200-day simple moving average (SMA) level of 0.6711 can keep the prices under check while 0.6587 mark comprising 50-day SMA, followed by May 27 peak near 0.6560, can limit the pair’s short-term declines.
Key Notes
NZD/USD seesaws near 2-week top, all eyes on RBNZ
NZD/USD wobbles on dollar short-covering ahead of RBNZ
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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