Talking Points:
• As general expected by the market (swaps) and economists, the RBNZ cut rates 25 bps to 2.50%
• Despite a clear 'dovish' policy move, the New Zealand Dollar would still rally after the move
• Following the ECB's QE upgrade led to a Euro rally, we are seeing a consistent distortion in mon pol influence
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Watch the recording of John Kicklighter's coverage of the FX market's reaction to the RBNZ Rate Decision. A rally from the New Zealand Dollar after an RBNZ rate hike is unusual, but we certainly can't call it unprecedented. After the Euro rallied after an ECB QE upgrade last week, we have seen the importance of benchmarking speculation in assessing how the market responds to important fundamental event risk like monetary policy. Given the market was prepared for a cut, the focus was what would happen beyond this meeting. And, according to Governor Wheeler's assessment it looks like the central bank is more likely to level out on rates (at a considerable premium to its major counterparts it should be said). Are the long-term implications the same as the short-term volatility? We discussed that and more in the live event.
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