(26 JUNE 2019)DAILY MARKET BRIEF 2:NZD in demand despite dovish statement

As expected, the Reserve Bank of New Zealand has maintained its Cash Rate unchanged at 1.50% at its monetary policy meeting. Yet the RBNZ dovish statement about weakening economic outlook, downside risks on trade, employment and inflation does not seem to convince FX traders, which continue to favor long NZD trades. Next rate cut should occur on 7 August 2019 meeting. Meanwhile, the Reserve Bank of Australia release of monetary policy minutes from June are hinting towards further cuts at its policy meeting next Tuesday.

It seems that market participants consider Governor Adrian Orr comment as not so dovish since the kiwi outperforms G10 currencies in early trading. However the RBNZ continues to support the idea of a cut of its Cash rate this year, a move that should most likely occur in August and therefore put additional pressures on NZD. Certainly, speculations over a suspension in a new round of tariffs and the resumption of trade talks following Saturday Trump – Xi meeting during G20 supports risk-on sentiment. Concurrently, a negative headline on the matter would necessarily have a stronger impact on the downside.

For now, NZD/USD rally remains, approaching 0.6680 short-term.