RBNZ overview
The RBNZ is expected to leave the Official Cash Rate (OCR) at 1.75% at its policy meeting while markets look for potential changes in language from the governor of the Central Bank, Adrian Orr – (Orr has been acting Governor since 27th March).
“A drop in a widely watched business confidence survey to a 7 month low has reinforced the expectation that the RBNZ will stick to its steady interest rate policy at this week’s policy meeting. The weak tone of business confidence has also enhanced the sensitivity of the NZD to an escalation in US/China/EU/Canada trade wars,” explained analysts at Rabobank:
“A more cautious outlook may be adopted by the RBNZ this week. At the policy meeting on May 19, the RBNZstated that “the direction of our next move is equally balanced, up or down. Only time and events will tell”. The RBNZ also reasoned that “economic growth and employment in New Zealand remains robust….ahead, global economic growth is forecast to continue supporting demand for New Zealand’s products and services”. While this remains the case, it is likely that fears over the potential impact of trade wars was a major component behind the drop in business confidence and this risk will likely be debated by the MPC this week.”
How could the RBNZ affect NZD/USD?
Interest rate markets are unlikely to be perturbed by a steady-as-she-goes outcome while, at the same time, the Kiwi has fallen against the dollar since the Feb meeting, from the lofty heights of 0.7436 down to 0.6792, (today’s new trend low) – and well below the key 200-month moving average support at 0.6980. Technicals stay bearish with RSIs biased to the downside longer term, (daily RSI a touch above 30 and oversold territory). However, anything remotely hawkish from the Governor would likely give the bird some much-needed relief above 0.6850 while the 10-D SMA is at 0.6899. To the downside, the Nov 2017 lows protect 0.6650
Key notes:
- RBNZ: OCR to remain at 1.75% – TDS
- RBNZ OCR review to come and go without any ruffles – NAB
- RBNZ: Expect no change in message – ANZ
About the RBNZ interest decision and statement
The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.
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