NZD/USD: RBNZ can lower interest rates in August

NZD/USD: RBNZ can lower interest rates in August

14 July 2016, 12:50
PCM-Brokers
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TRADING RECOMMENDATIONS

 The interest rate in New Zealand is one of the highest among advanced economies, and now stands at 2.25%. Since June last year, the RBNZ cut rates repeatedly with the then level of 3.5% to the current 2.25%. However, after a short-term reduction of the New Zealand dollar quickly regained its position in the foreign exchange market and continued growth, and the pair NZD / USD is in a steady uptrend since September 2015.

Even the collapse of the financial markets at the beginning of the year, accompanied by a sharp decline in commodity prices, did not stop the pair quickly restore its position.

Events in the last days of Europe spurred investor interest in safe haven currencies and the Pacific region with a high interest rate.

High interest rate at the same time does not stop and the rise in prices in the housing market in Australia and New Zealand.

However, the expensive national currency can be a hindrance to the economy of New Zealand, largely export-oriented. This wood and the agricultural sector is one of the major New Zealand economy.

In March, New Zealand's central bank lowered its key rate to the current level of 2.25%. Subsequently, the same comments from the RBNZ said that the central bank fears a further deterioration of the global economic outlook and the decline in inflation expectations in most of New Zealand. Inflation expectations in New Zealand decreased the prospects for the world economy, particularly in relation to Brexit, deteriorated.

If the trade-weighted exchange rate of the New Zealand dollar will remain high, the RBNZ will have to significantly reduce their forecasts of inflation and GDP. In this situation, the RBNZ will be difficult not to lower the official interest rate.

During the trading session in Asia, the New Zealand dollar fell on the foreign exchange market on reports from the RBNZ that the Bank will present on July 21 a new assessment of the economic situation in New Zealand. Financial market participants considered it as a training ground by the RBNZ to lower interest rates in New Zealand due to the changed financial conditions in the country because of the events in Europe in the background Brexit. The meeting is on monetary policy in New Zealand is scheduled for August 10.

 

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