RBNZ Rate Cut Is Now “One In Three” For 2012…

Newsletter

Zero spam.

(NZ) Reserve Bank of New Zealand left its cash target rate unchanged at 2.50% as widely expected, reiterating a stimulatory policy stance is still needed to support the economy.

(NZ) RBNZ lowered its FY12/13 GDP outlook to just above 3% while targeting 3-month bill rate around 2.7% until mid-2013, suggesting it would not rush to tighten policy for some time. 

3rd Party Advertisement

(NZ) RBNZ Governor Bollard:

  • RBNZ has the scope to cut rates but does not plan to do so at the moment.
  • NZD remains high due to external distortions.
  • No close relationship between cash rate and NZD.
  • Not much can be done to contain NZD.
  • Sees 30% chance of Greece exit and a 10% chance of exit by other EMU members.
  • New Zealand consumers are being cautious.
  • Funding is not constrained, Banks would like to lend more.

(NZ) An ASB economist said there is now a “one in three” chance of an RBNZ rate cut this year as central bank may respond to deteriorating conditions in Europe.

How to interpret these headlines?

According to today’s statement by RBNZ Bollard, current RBNZ’s monetary policy should remain stimulatory (easing) to support the economy, although a RBNZ Rate Cut is justifiable during today’s meeting, Bollard is adopting a wait-and-see approaching, pending developments out of Europe, with special emphasis on Greece and its potential departure of the EMU.

Reading between the lines, I believe what Bollard is saying is that “we are going to cut, but just not now”, “we will tell everyone our next move (*wink *wink) by playing with the word ‘stimulatory’ so everyone gets excited…” In short, Bollard wants a weak NZD to stimulate its economy.  Assuming that the current trend of risk aversion were to continue, RBNZ will probably not act; on the other hand, if Greece were to remain in the EMU and global sentiment changes to risk appetite, then RBNZ may not have a choice but to act… Considering the fact that NZDUSD has dropped over 5% since the previous rate decision after Bollard’s comments on possible policy adjustment to curb a strong Kiwi, I’ll say his intentions were crystal clear…  I would be looking to SELL NZD in the short-term although I have to admit that NZD’s directional bias will depend greatly on market risk sentiment.

 

FUNDAMENTALS
Forex Weekly Outlook May 22 ~ 26, 2017
Forex Weekly Outlook – May 15 ~ 19, 2017
Fed Yellen’s Debut: Calculated Response Or Rookie Mistake?
Is Yellen Asking WWBD (What Would Bernanke Do?)
NZD Interest Rates To Move Above 5.00% In 2017…
About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

Comments

  1. selling just based on possible expectation of easing is nuts. that may or may not materialize.
    nzd is driven by risk sentiment and china conditions with euro.
    good luck risking a short at this juncture

Speak Your Mind

*

Newsletter

Zero spam.