The RBNZ is up this week! What does the central bank have to say? More importantly, how can markets react to its statement?
Here’s a (short) list of this week’s potential catalysts:
RBNZ’s quarterly policy statement (May 8, 3:00 am GMT)
Improvements in geopolitical risks and the U.S.-China trade negotiations made it easy for the bulls to attack when the Reserve Bank of New Zealand (RBNZ) printed its policy decision last quarter.
Of course, it helped a lot that Governor Orr and his gang had been less dovish than what analysts had expected.
While they shared that inflation levels still require “continued supportive monetary policy,” their updated forecasts also showed that they expected a rate hike some time in Q1 2021. That’s later than the previous Q3 2020 but still not bad considering that traders were low key expecting a rate cut by end of 2019.
This week market geeks expect the central bank to CUT its rates by 25 basis points to 1.50%.
And why not? Since the last RBNZ decision we’ve seen a lukewarm GDP, a much weaker-than-expected wage growth, and subdued inflation. Heck, head Honcho Orr himself highlighted an easing bias back in March!
Re-escalation U.S.-China trade tensions
In case you missed it, Trump spent his Sunday afternoon threatening to up the tariffs on $200B worth of Chinese goods from 10% to 25% starting Friday while $325B worth of “additional goods” will be taxed “shortly” as he thinks China’s trade deal talks are moving “too slowly.”
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
— Donald J. Trump (@realDonaldTrump) May 5, 2019
This is the first time since December 1 last year that the POTUS has threatened more tariffs as the U.S. and Chinese reps negotiate a deal.Considering that some analysts had expected a trade deal by Friday, the re-escalation in trade tensions took traders by surprise and resulted in risk-off vibes in today’s early Asian trading.
For now, WSJ is reporting that China is considering canceling trade talks scheduled to resume in Washington on Wednesday. On the other hand, some speculate that we COULD see a deal by Friday, and that Trump made his threats to make it appear as if his tweets speeded up the process.
How will Trump’s latest threats affect current trade negotiations? Make sure you’re glued to your tube for updates!
Missed last week’s price action? Read NZD’s price recap for April 29 – May 3!