Positive vaccine news and the latest monetary policy statement from the Reserve Bank of New Zealand were the sparks that rocketed the Kiwi higher to the top spot among the major currencies.
New Zealand Headlines and Economic data
Orr readies new RBNZ stimulus tool as step toward negative rates – the expectation is that the RBNZ will announce cheaper loans to banks, effectively lowering borrowing rates.
The big market driver of the week came on Monday from Pfizer / BioNTech, announcing that their COVID vaccine is more than 90% effective. This sparked a big risk-on move across the financial markets as traders priced in the odds of an economic recovery coming sooner rather than later. This sentiment did fade by the Monday U.S. session, but lingered on to influence the markets through most of the week. The New Zealand dollar spiked higher against most of the majors on the news, along with other risk assets.
RBNZ Monetary Policy statement: New Zealand’s central bank delivered a fresh round of monetary stimulus while also projecting a more upbeat view of the economic recovery – this upbeat view lead to traders reducing the odds of the RBNZ going negative on interest rates, pushing the Kiwi higher against the majors to take the top spot and keep it for the week.
- “The latest data for September shows migration arrivals fell to 2,900, down 80 per cent on the previous year, and there was a net gain of 800.”
- “Overseas visitor arrivals were 8,600, 700 higher than August, but 253,200 lower than year ago levels. The biggest dropoff was seen in visitors from Australia and China.”
RBNZ’s Hawkesby: sticking to plan of keeping rates unchanged until March – “A number of economists had called the OCR to be negative next year. A number of them changed their call through the afternoon, and we feel the market reaction was driven from that as opposed to the message we were giving,” he said.
The Kiwi dollar shifted lower during the Thursday session, likely a move supported by a broad shift in risk sentiment towards negative. It’s likely traders were coming off vaccine news highs and focusing on the rising COVID cases in Europe and the U.S., as well as the falling odds of a new stimulus bill coming from the U.S. government.
New Zealand manufacturing activity slowed in October falling to 51.7 from 54.0 in September
New Zealand food prices climb 2.7% on year in October, down from 3.1% in September.