Whattup, news traders! If you’re planning on trading the RBNZ’s decision, then you gotta make sure you’re around on June 26 at 3:00 am GMT to trade the event!
Here’s what you need to know before you place your orders:
What happened last time?
As expected, the Reserve Bank of New Zealand (RBNZ) cut its interest rates by 25 basis points to a new record low of 1.50% in May.
On an international level, Governor Orr and his friends didn’t care for the uncertainty around the global economic outlook and trade concerns.
The local economy wasn’t so hot either. RBNZ cited lower net immigration (read: reduced population growth), “house price softness,” and low business sentiment as reasons why members green-lighted a lower interest rate.
While the rate cut was expected, market players didn’t expect the RBNZ to be so dovish. In fact, near the end of its official statement the central bank noted that “a lower path for the OCR over the projection period was appropriate.” Yipes!
The surprisingly dovish statement dragged the Kiwi lower across the board. Luckily for the bulls, the comdoll eventually recovered and traded within 0.50% of its open price for the rest of the day.
What are traders expecting this time?
Back in May Governor Orr hinted that their outlook for interest rates remain “balanced” after their rate cut. Then, in early June Assistant Governor Christian Hawkesby shared that they see interest rates remaining “broadly around current levels for the foreseeable future.”
If the RBNZ wants to preserve its hipster status and keep the Kiwi from looking more attractive than other major currencies (a strong currency is bad news for an export-dependent economy), then it’s in its best interest to signal more monetary easing.
But not this month! Analysts believe that we’ll more likely see a “dovish hold” than a rate cut this week. In fact, RBNZ members will likely wait for the next inflation and employment reports due in July and August before they take further actions.
Besides, it won’t hurt to wait for the outcome of the meeting between Trump and Xi Jinping this week. Since most of the external threats come from uncertainty around global trade conditions, the RBNZ would want to know if they do need another rate cut before they pull another one.
How might the Kiwi react?
Traders generally aren’t expecting a rate cut from RBNZ this month, but most of them expect one in August.
If the central bank shares more concerns, or signals urgency to ease its policies further, then we could see the Kiwi trade lower as rate cut speculations soar.
But if RBNZ barely changes its tone or suggests that its outlook is still broadly “balanced,” then the Kiwi could enjoy a bit of relief rally.
Whichever direction you choose to trade, make sure you don’t bet on a sustained move!
If last month’s reaction was any clue, then it’s unlikely that Kiwi bulls and bears will look to the RBNZ’s decision alone for cues. Take a look at other market themes that might affect the comdoll’s price action this week!