Talking points:
- NZD/USD declined 1 percent to a weekly low
- HSBC China Manufacturing PMI fell to 49.2 versus 49.6 expected
- RBNZ not considering a rate hikes at the moment
The New Zealand Dollar declined versus the US Dollar after Reserve Bank of New Zealand’s Assistant Governor John McDermott presented a speech in Hamilton. NZD/USD also hit a weekly low following McDermott’s speech. Kiwi further declined after China’s HSBC Manufacturing PMI fell to a 12-month low of 49.2 in April versus 49.6 expected.
RBNZ’s Assistant Governor John McDermott noted that the central bank is not considering any increases in the official cash rate at the moment; however weaker demand and prices would prompt a rate-cut consideration. He also said monetary policy will remain stimulatory. The intent of monetary policy is to help boost GDP and bring inflation up from near-zero levels. On the sidelines, China is one of New Zealand’s biggest trading partners. The slowdown of PMI in China may create less demand from businesses in New Zealand. This in turn may cause growth to slow down which creates bets the central bank (RBNZ) will lower rates.
RBNZ’s Assistant Governor John McDermott:
- Monetary policy to remain stimulatory
- Monetary policy will help boost GDP, inflation
- RBNZ remains vigilant in watching wage bargaining
- RBNZ remains vigilant in watching price setting
- Near-zero inflation mostly due tradables
- RBNZ not considering any increase in interest rate-cut consideration
- Weaker demand, prices would prompt rate-cut consideration
- Inflation outlook requires period of supportive policy
