Reserve Bank of New Zealand (RBNZ) – what to expect

The Reserve Bank of New Zealand is expected to keep its benchmark interest rate at +1.75% this evening (08:00 pm ET).

Many expect Governor Orr to join the RBA with a more “dovish” statement this go around, and in contrast to the November release. The statement should reflect the increased global risks over the past three-months.

Currently, the market is pricing close to a +40% chance of an RBNZ rate cut by May, and with that in mind, investors should expect the accompanying policy statement to trigger a rates market reaction.

Kiwi inflation is just below target, but unemployment has risen recently.

Rate differentials support U.S dollar:

Many of the commonwealth central banks (BoC, BoE, RBA) have assumed the Fed’s cautious outlook on monetary policy, which suggests that a gap in yields – U.S vs. the rest – will remain for the foreseeable future.

Higher U.S yields does support owning dollar dominated assets. The New Zealand dollar is down by -0.2% at NZ$0.672, having dropped to a three-week low of NZ$0.6719 during today’s European session.

Reserve Bank of Australia (RBA)

The RBA has adopted a “neutral” policy bias, stating that the Australian economy “could be weaker than it thinks and that the risks to the economic outlook are more balanced.”

Nevertheless, Governor Lowe remains upbeat on the Aussie job market, but has given the RBA the latitude to cut interest rates should growth fall short of expectations and the unemployment rate start to rise.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell