RBNZ Rate Decision This Evening

10 August, 2016

The Reserve Bank of New Zealand (RBNZ) will announce a rate decision at 22:00 GMT+1, which will be followed by a statement from Governor Graeme Wheeler. The RBNZ has stated on 21st July that further QE will be required to ensure the future inflation settles near the middle of the target range and a rate cut is expected.

The market and many analysts expect that the RBNZ will cut rates by 0.25%, from 2.25% to 2.0% today despite a rate cut will lead to further booming of the overheated housing market as mortgage rates will be lower. Some even predict another rate cut may happen in November. The market expectations weigh on the New Zealand dollar.

The annual inflation rate has been below 1% for seven consecutive quarters since Q4 of 2014, and below 2% since the end of 2011. The Bank’s inflation target range is between 1% to 3% with a focus on the midpoint of 2%.

In order to grapple with low inflation rate and the strengthening of the NZD may hamper the economy and drive down inflation, the RBNZ might be the next central bank to cut rates, following the Bank of England and the Reserve Bank of Australia.

However, even if rates are cut to 2%, the likely subsequent fall of the NZD may not be a sharp one for four reasons. Firstly, the 2% rate is still comparatively higher than the rates of other major currency countries. Secondly, the dollar strength has been fading since yesterday. Thirdly, the market has priced in to an extent. If the result is in line with the expectation, then the NDZ may fall initially then followed by a rally as the market will price out. The NZD could fall deeper if the rate cut is accompanied by more than expected additional QE measures.

Fourthly, the overall economic outlook seems to be positive. The Q2 GDP figure released on 15th June was 0.7%, beating the expectation of 0.5%, yet lower than the previous figure of 0.9%. The Building Permit in July was up from -0.9% in June to 16.3% in July, reaching the highest level since August 2015. The Business Confidence was 16.0, reaching the peak of this year.

On the daily chart, NZDUSD has been oscillating in an uptrend channel since 20th Jan, and forming a head and shoulder pattern since mid-June, indicating accumulated upside selling pressure. The resistances at 0.725 followed by 0.732. The supports at 0.7053 followed by 0.7053, 0.70, 0.695, 0.692, and 0.688.


Source link  
Peaked trade optimism?

Throughout the past week, the US dollar has received support after strengthening expectations that the Fed will take an extended break after three consecutive rate cuts...

Russel 2000 doesn't support S&P500 optimism

S&P500 closed Monday at historical highs, adding 0.55% on the day close. Both expected new Fed interest rates cut and possible...

Oil drops on weak corporate data out of China

Oil prices fell on Monday after strong gains last week, as data released in China reinforced signs that its economy is slowing, though progress...


Market Sentiment Hinging On Progress In Brexit

The British parliament will vote on the Brexit agreement today at 18:00 GMT. In theory, this should be a simple vote, with a definite...

Market shows demand for yielding assets

The market shows demand for yielding assets, which in turn supports demand for the stocks and currencies of emerging markets. The main...

Yuan and Dollar as a weapon in trade wars

The US Nonfarm Payrolls on Friday could even be called boring: the report showed the preservation of a completely healthy labour market...


Disappointment with Fed and tariffs

Trump announced 10% tariffs on Chinese goods worth $300 billion since September 1, thus ending the US-China trade truce after disappointingly...

Fed pushes down stocks

Markets have started the week under pressure. Expectations that the Federal Reserve will cut interest rates by 50 points in July collapsed...

Gold updates new 6-years highs

Gold benefits from a combination of two factors: lower interest rates in debt markets and continuing hopes that the global economy...

  


Share it on:   or