- RBNZ’s Orr speaks at the parliamentary committee to justify recent rate-cut.
- Markets show little reaction as most comments are neutral and/or same to yesterday’s statement.
NZD/USD seesaws near 0.6580 during the initial Asian session on Thursday. The Kiwi pair moved little as RBNZ’s Orr repeated mostly yesterday’s comments while speaking in front of the parliamentary committee.
Reserve Bank of New Zealand (RBNZ) stole the show on Wednesday by announcing a 0.25% cut to its official cash rate.
The move dragged the New Zealand Dollar (NZD) to the lowest since November 2018 before nursing some losses on neutral comments and economic forecast from the monetary policy statement.
On early Thursday, Governor Adrian Orr appeared in front of the parliamentary committee to justify yesterday’s action from the central bank. The three hearings, which could last for hours, started with RBNZ’s Orr emphasizing export prices and global economic growth to be the main driver of the latest moves. Mr. Orr then said the employment would have slowed if the rate cut was avoided. Moving on, he also said that the inflation hasn’t responded to capacity constraints and holds outlook for interest rates broadly balanced.
RBNZ’s Orr seems trying to restore the confidence of the Kiwi buyers but has gained little success so far. However, traders might not risk ignoring him as he still speaks by the press time.
Moving on, China’s inflation numbers, producer price index (PPI), trade balance, initial jobless claims from the US could entertain market players ahead of the speech from the Federal
Reserve Chairman Jerome Powell at the Federal Reserve System Community Development Research Conference. Also, the US-China trade talks will begin from today and will be the key to antipodeans as China is the world’s largest commodity user.
While China’s consumer price index (CPI) (YoY) is likely to have increased to 2.5% from 2.3% in April, PPI is also expected to rise to 0.6% from 0.4%.
On the US side, PPI ex-food and energy, also known as the Core PPI, is the key that’s likely to have risen to 2.5% from 2.4% in April while following the yearly format. Additionally, March month trade balance bears market forecast of $-50.2 billion versus $-49.4 billion prior whereas initial jobless claims for the week ended on May 03 could have dropped to 220K from 230K earlier.
Considering latest dovish rhetoric from RBA and RBNZ, Fed’s Powell speech will be closely observed to get the clues for any monetary policy easing likely to come in future.
The US-China trade talks will be crucial after the US-led threats offered a bump to the more likely trade deal. The US lawmakers have already conveyed that failure to get a positive result might push them to announce tariffs on Chinese products starting from Friday.
Technical Analysis
Considering the pair’s bounce off the 0.6570/80 support-zone, chances of its recovery to 0.6600 can’t be denied but six-week-old descending trend-line could limit further upside at 0.6630.
On the downside break of 0.6570, 0.6510, 0.6470 and October 2018 low near 0.6420 can please bears.
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