NZD/USD: RBNZ in Focus
The Kiwi will be in focus in the Asian session today as we hear from the RBNZ.
The Kiwi will be in focus in the Asian session today as we hear from the RBNZ.
There isn’t expected to be any major changes at the meeting today, with the OCR to remain unchanged at 0.25%, while the asset purchase program is not predicted to be expanded.
Despite the fact New Zealand moved quickly out of the lockdown phase, the economy is still facing a large decline, not seen since the early 1990s. The RBN did act swiftly and aggressively like the other global central banks and slashed the cash rate to 0.25%.
The interesting thing about the way New Zealand handled the situation was that they looked to go into very severe lockdown measures initially, in hopes of eradicating the virus. Which by all reports they have done. So the initial contraction would be expected to be large, followed by a sharp bounce back.
That said, there are still areas of the economy such as tourism that simply will not recover this year with border closures likely to remain in place.
There has been some talk that RBNZ governor Orr could move into negative interest rate territory, but it has been said that it wouldn’t happen until next year. But nevertheless, it hasn’t been ruled out just yet.
From today’s meeting, we are really just going to be looking for more guidance around that point and any sort of outlook the board is prepared to offer up to markets.
There is also the belief by some of the major local banks that asset purchases could increase in August.
Looking to the charts, and despite yesterdays tumble during Asian trade thanks to the Navarro comments, the NZD/USD has regained some strength. Price is currently green on the session.
The range between 0.6400 and 0.6500 is well and truly intact, and I just can’t see what we could get from this meeting that could see price break out of that range.
I feel like it is a ‘wait and see’ type event today.
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