NZD/USD: RBNZ Holds OCR Rate at 2.50 Percent, Kiwi Continues its Ascent
THE TAKEAWAY: [ RBNZ holds rate at 2.50 percent ] > [hint of future rate cuts]> [NZD continue to gain for the week]
The Reserve Bank of New Zealand held the Official Cash Rate at 2.50 percent. Subsequently the NZDUSD pairgot a slight lift from the announcement. The news release reinforces the idea that RBNZ is adopting a wait and see policy to cope with its sluggish recovery and declining inflation rate. Governor Alan Bollard sited that weakening global outlook is negatively impacting New Zealand’s trade balance, which is already being undermined by the rise in value of the kiwi relative to other currencies. The press release did go on to state that, “offsetting these negative influences, housing market activity continues to increase…”,which the RBNZ believes will drive GDP growth and balance out the New Zealand economy.
NZD/USD 1 Min Chart:
from FXCM, prepared by Adrian Robles
The NZD/USD sold off leading up to the announcement, but popped 25 pips after the release. The NZD’s carry rate has become more attractive since Australia cut its rate last week. The Kiwi continues to rally this week, as its carry rate becomes more favorable.
Governor Bollard took on a more dovish tone since the last presses release, “New Zealand’s Economic outlook has weakened a little since the March Monetary Policy Statement.” Bollard did state in his March address that if the exchange rate remains strong, without economic improvement, the Bank would need to reassess the outlook for monetary policy settings. The two releases hint that future rate cuts could be possible if economic conditions do not improve and if the exchange rate remains elevated.
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