Central Bank Watch Overview:
- The Reserve Bank of New Zealand is favored to cut its main interest rate next week, although traders are anticipating a long pause between policy shifts thereafter.
- Neither the Bank of Canada nor the Reserve Bank of Australia are due to change interest rates over the next six months, allowing the Australian and Canadian Dollars some breathing room.
- Retail trader positioning suggests AUD/USD may continue to rally, while NZD/USD and USD/CAD are on less certain footing.
Everything is awesome – at least, that’s what bond markets and US equities are signaling to market participants. With US stock markets at all-time highs and US Treasury yields rising rapidly in recent weeks, there is a sense of calm settling over the market (see: falling volatility readings) thanks to news headlines that the US-China trade war may be winding down. As long as the global economy is on the path to avoiding a significant slowdown – a resolution between the world’s two largest economies is a step in that direction – G10 currencies’ central banks’ “race to the bottom” may be slowing down.
RBNZ Rate Cut in Sight, Then a Long Pause
The New Zealand Dollar has been one of the worst performing currencies in 2019, but over the past few weeks, has been able to recover meaningfully around US-China trade war headlines. Reduced speculation around global growth concerns have helped lift expectations for commodity-sensitive economies and industries. As a result, while the RBNZ is still likely to move ahead with its rate cut over the coming week, it seems that it is the