Trading the News: Reserve Bank of New Zealand (RBNZ) Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) meeting may do little to boost the appeal of the New Zealand dollar as the central bank is widely expected to keep the official cash rate (OCR) at the record-low of 1.75% in August.
The RBNZ may continue to endorse a wait-and-see approach for monetary policy as ‘the recent weaker GDP outturn implies marginally more spare capacity in the economy than we anticipated,’ and Governor Adrian Orr & Co. may continue to tame expectations for higher interest rates as officials argue that ‘the best contribution we can make to maximising sustainable employment, and maintaining low and stable inflation, is to ensure the OCR is at an expansionary level for a considerable period.’ In turn, more of the same from the RBNZ may produce a bearish reaction in NZD/USD[1] especially as the Federal Reserve[2] remains on course to further normalize monetary policy.
However, like the Reserve Bank of Australia (RBA)[3], an unexpected shift in the RBNZ’s forward-guidance for monetary policy should heighten the appeal of the New Zealand dollar, with a batch of hawkish rhetoric likely to fuel the recent rebound in NZD/USD as it encourages bets for higher interest rates. Sign up and join DailyFX Currency Strategist Ilya Spivak LIVE[4] for a broader discussion on current themes and potential trade setups!
Impact that the RBNZ rate decision has had on NZD/USD during the previous meeting
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