Talking Points:
- The Reserve Bank of New Zealand meets on Wednesday, May 8 at 02:00 GMT; rates markets are pricing in a 51% chance of a 25-bps rate cut.
- NZDUSD[1] prices reached fresh 2019 lows at the end of April, breaking the January 3 flash crash low in the process.
- Retail traders[2] are currently net-long NZDUSD and have remained net-long since April 2; during that timeframe, NZDUSD prices fell by -3%.
Join me on Mondays at 7:30 EDT/11:30 GMT[3] for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.
05/08 WEDNESDAY | 02:00 GMT | NZD RESERVE BANK OF NEW ZEALAND RATE DECISION
The Reserve Bank of New Zealand’s overnight cash rate peaked at 3.50% in May 2015 and has been on a slow erosion over since; the most recent 25-bps rate cut was at the November 2016 meeting. Mounting concerns about a soft economy may have reached the tipping point in recent weeks, finally provoking the Reserve Bank of New Zealand into its first rate move in two and a half years.
The Q1’19 New Zealand GDP report showed that growth was weaker than anticipated, coming in at 2.3% annualized versus 2.5% expected, from 2.6% in Q4’18. Meanwhile, the Q1’19 New Zealand inflation report produced a similar disappointment, registering 1.5% versus 1.7% expected, from 1.9% (y/y). Overall, the Citi Economic Surprise Index for New Zealand, a gauge of economic data momentum, has fallen from -1.8 to -11.2 since the March RBNZ
