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NZD/USD crashes on RBNZ decision

The RBNZ did not cut rates but it certainly sounded dovish. The central bank removed the “need for higher rates” from its statement. Has the tightening cycle officially ended?

NZD/USD is trading under 0.74 and hit a low of 0.7370 so far.

Despite the recent falls in NZD/USD, the central bank still complains about the “unjustifiable” value of the NZ dollar. Inflation is expected to gradually move towards 2%.

The RBNZ was expected to express some worries on falling inflation after the negative quarterly CPI level we have seen last week.

Wheeler and his colleagues raised the rates 4 times in 2014 from 2.50% to 3.50%, but then hinted about a pause in the tightening cycle back in July. Since then, the fall in oil prices has weighed on inflation, and many expected more dovish rhetoric.

However, this kind of statement beat dovish predictions.

NZD/USD traded around 0.7440 before the publication.

Apart from lower inflation, the New Zealand economy is doing quite well, with rising employment and recovering milk prices.

Earlier, the US Federal Reserve maintained the key points of the statement. After a lack of response from markets, the  dollar eventually began gaining against the others.

NZD USD down on RBNZ dovish statement January 29 2015 technical chart

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.