(24 JUNE 2019)DAILY MARKET BRIEF 2:RBNZ set for a second rate cut this year
The global risk-on sentiment from last week has given the kiwi a strong boost following a drag amid geopolitical developments in the Gulf of Oman and the announcement made by China to raise anti-dumping duties on seamless alloy steel tubes. Yet although the New Zealand Central Bank is not expected to move its cash rate on Wednesday, it is most likely going to confirm its dovish bias and hinting towards a 0.25% rate cut in August 2019 as inflation pressures have slowed in first quarter 2019.
The RBNZ already cut its cash rate to record low 1.50% in May while RBNZ Governor Adrian Orr is expected to confirm that further easing is likely as inflation remains below midpoint target range of 2% (1Q CPI y/y: 1.50%) and despite an uptick in 1Q GDP figures of 2.50% (prior: 2.30%) released last week. The RBNZ does not respond to domestic market deterioration since labor market is tight while wage growth showed a pick up – it rather responds to rising global uncertainties and follows the dovish trend shift of major central banks. There is however good reasons to consider a decline in NZD following the announcement on Wednesday.
Currently trading at 0.6611, NZD/USD is heading along 0.6630 as investors are waiting for developments in US – China trade discords ahead of G20 meeting in Osaka.
