USD to NZD Rate Falls Below 0.61 After 50 bps RBNZ Rate Cut
The Reserve Bank of New Zealand's (RBNZ) recent rate cut has added to the volatility in the NZD to USD rate.
The Reserve Bank of New Zealand’s (RBNZ) recent rate cut has added to the volatility in the NZD to USD rate. The exchange rate had climbed by over 5 cents in the past two months due to a weakening USD, driven by expectations of a substantial rate-cutting trajectory from the Federal Reserve. However, as the chances of another 50 basis point cut by the Fed dwindle, these gains have reversed.
With the RBNZ initiating its easing cycle through a rate cut last night, the NZD/USD has been on a consistent decline. Over the past week, the pair has dropped from a high of 0.6378 to a low of 0.61, a notable 270-pip decrease. This movement reflects investor anticipation of further significant cuts by the RBNZ following this initial reduction.
NZD/USD Chart Weekly – Falling Below the 100 SMA Again
RBNZ Meeting and Rate Announcement
This morning, the RBNZ announced its latest rate decision, with a 50 basis point cut anticipated following a previous 25 basis point reduction. This easing was largely prompted by decreasing inflationary pressures, reinforcing expectations of a more accommodative policy stance from the RBNZ going forward.
Reserve Bank of New Zealand Policy Decision
RBNZ Interest Rate Decision:
- Rate Cut: Cash rate lowered by 50 basis points to 4.75%, from the previous 5.25%.
- Reasons for Cut:
- New Zealand now has excess capacity, with weak business investment and consumer spending.
- Low import prices are aiding disinflation.
- Geopolitical tensions continue to create challenges for global economic activity.
- A 50-basis point cut aligns with the goal of maintaining low and stable inflation within the 1-3% target.
Statement Highlights:
- Inflation: Current annual consumer price inflation is within the 1-3% target.
- Economic Conditions:
- Employment conditions are softening, and growth indicators suggest subdued near-term activity.
- The economy’s excess capacity is encouraging price and wage adjustments in line with a low-inflation environment.
RBNZ Meeting Minutes:
- Policy Stance: Future OCR adjustments will depend on economic developments.
- Economic Assessment:
- Excess capacity is helping to temper inflation expectations.
- Inflation rates are expected to stay within the 1-3% band and converge to the target midpoint over time.
- Decision on Rate Cut Size:
- Members considered both 25 and 50-basis point cuts, ultimately agreeing that a larger cut aligns with the low-inflation mandate.
- Financial Conditions: Remain restrictive, with subdued credit demand.
- Labour Market: Conditions are projected to ease further in the coming months.
NZD/USD Live Chart
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Related Articles
Comments
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals