New Zealand Dollar Drops After Disappointing 2Q GDP Data

Talking Points

• New Zealand Dollar drops following 2Q GDP figures
• GDP grew 0.9% q/q vs. 1.1% expected, 0.7% q/q in 1Q
• Data may have encouraged RBNZ rate cut speculation

The New Zealand Dollar declined after second quarter GDP data disappointed relative analysts’ expectations, possibly fueling RBNZ rate cut speculation. The year-on-year output growth rate registered at 3.6 percent, in line with expectations. However, the quarter-on-quarter gain crossed the wires at 0.9 percent, slightly lower than the 1.1 percent projected by economists.

Overnightindexswaps(OIS) suggested that traders were already pricing in at least one cut in the central bank’s main lending rate over the coming 12 months ahead of the GDP release. With that in mind, the worse-than-expected data may have trigged speculation that a reduction may come sooner relative to prior bets. As it stands however, the probability of a cut at the next RBNZ meeting is implied at just 6 percent.