NZD/USD Drops as RBNZ Hints at Prospective Future Easing

Talking Points:

• NZDUSD depreciates after RBNZ monetary statement suggest further easing for the year may be necessary
• RBNZ says global demand and China slowdown has increased uncertainty amid falling key commodity prices
• RBNZ maintains positive growth outlook for 2016, due to immigration, tourism, and domestic growth indicators

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The New Zealand Dollar depreciated roughly 1 percent today against its US counterpart after the Reserve Bank of New Zealand Governor Wheeler hinted at possible easing. Rates themselves were unchanged at 2.5 percent, however the statements following the decisions cited major concerns for the NZD and possible future monetary policy. The Reserve Bank of New Zealand was overt with their expectations of further appropriate depreciation for the NZD, suggesting it was in line with falling export prices. Currency strategist Ilya Spivak outlines key bearish levels in his technical analysis of the NZD/USD.

Global growth concerns paired with falling key commodity prices were cited as a major reason for the RBNZ’s depreciation concerns. The price of Oil has been consistent in its effect on global growth outlook for many central banks, the RBNZ is no different, and along with Oil it has cited low global inflation growth and market volatility. These are themes that have commonly been cited in central bank statements, however due to the nature of New Zealand’s commodity export based economy, falling prices hold more precedent.

The RBNZ in its statement outlined domestic growth updates as well, maintaining 2016 growth within the context of a “Softer” 2015. Some of the factors accredited to boosting domestic growth were immigration, tourism, increased construction activity, as well as both business and consumer confidence. Falling fuel prices were blamed for the low headline CPI, however annual core inflation is in line with expectations. The RBNZ’s inflation expectations remain stable for the time being.