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Rbnzratecut

Reserve Bank of New Zealand: 50 or 75?Markets and economists widely anticipate that the Reserve Bank of New Zealand (RBNZ) will reduce the Overnight Cash Rate (OCR) by 50 basis points (bps) to 4.25% on Wednesday, a move that would push the OCR closer to neutral levels. Markets Fully Pricing in a 50 Basis Point Cut Markets are assigning a 60% chance that the RBNZ will opt for a 50 bp cut (60 bps of easing priced in), with a 40% chance that the central bank may swing for a bulkier 75 bp reduction. A 50 bp cut in the OCR would follow a 50 bp reduction in October and a surprise 25 bp cut in August. I expect the RBNZ to follow through and reduce the OCR by 50 bps this week. Inflation has cooled to 2.2% in Q3 24 and is now within the RBNZ’s target band of 1-3% for the first time since early 2021. Inflation expectations also remain pretty much anchored around the 2.0% mark. Economic activity (GDP – Gross Domestic Product) remains well and truly in the doldrums; Q2 24 data showed economic growth shrank by 0.2%, following a paltry 0.1% expansion in Q1 24. GDP per capita also contracted by 0.5% in Q2 24, coupled with a loosening jobs market. Employment growth showed a contraction of 0.5% in Q3 24, and the unemployment rate rose to its highest level since late 2020 (4.8% in Q3 24). However, on the other side of this fence, some desks – such as Goldman Sachs – highlight the possibility of a 75 bp cut given the economic downturn, increased unemployment, and the long break between now and the next meeting (mid-February next year), which could leave the central bank somewhat behind the curve. Global Risks Remain Uncertain The re-election of Donald Trump and potential tariff changes introduce a degree of unpredictability for New Zealand’s economy, particularly for tradeable inflation. Still, it is merely speculation at this point, and the implications for New Zealand's inflation are unclear. I anticipate that the November statement will reflect confidence in the progress made on inflation, and the central bank will emphasise a gradual approach to policy easing, contingent on incoming data. With that being said, considering the economic backdrop, I imagine the quarterly projections may reveal additional rate cuts next year, with CPI forecasts potentially being revised lower, with limited revisions for GDP growth metrics. NZD/USD in Focus A 75 bp cut would likely trigger enough of a ‘surprise’ and see the New Zealand dollar (NZD) sell off quite extensively, particularly against the US dollar (USD). In contrast, a 50 bp cut, which, as I noted above, is fully priced in, is unlikely to yield that much of a surprise/reaction, especially if dovish language is absent and the OCR projections are only moderately revised lower towards the end of 2025. I will be keeping a close eye on NZD/USD during the rate announcement. An outsized 75 bp cut might trigger a strong downside move in the pair, particularly as investors have pared back US rate-cut bets – markets are now just pricing in 13 bps of easing for December’s meeting – as well as the USD being bolstered by the incoming Trump administration and safe-haven demand. The monthly chart shows that price is trading at range support from N$0.5846, while the daily chart suggests scope to push for nearby support at N$0.5807. Therefore, daily and monthly support provides a ‘floor’ for potential buyers, which could hold if the RBNZ opts for a 50 bp cut. A 75 bp cut, nevertheless, could see the aforementioned support zone challenged. Written by FP Markets Market Analyst Aaron Hill
Long
by FPMarkets
RBNZ Reinforces Dovish Stance and Delivers 50bp Cut Overnight, the Reserve Bank of New Zealand (RBNZ) reduced its Official Cash Rate (OCR) by 50 basis points (bps) and signalled further policy easing is on the table amid softening inflation. This leaves the current OCR at 4.75%. Cuts Ahead The accompanying Rate Statement communicated that the current economic landscape provides scope to reduce rates further. However, the central bank emphasised that rate adjustments depend on the ‘evolving assessment of the economy’ and ‘there are still risks that further adjustments might be faster or slower than currently expected’. The Committee also touched on escalating tensions in the Middle East, noting that it ‘could pose significant risks to both global economic activity and energy prices. Should conflict escalate, oil prices and shipping costs could rise, and adverse investor sentiment could trigger asset price corrections and tighter financial conditions’. Several desks and money markets (the Overnight Index Swaps market) are currently pricing in another 50bp cut for November’s meeting – this will be the last time the central bank meets in 2024. New Zealand’s Economy at a Standstill We must remember that the RBNZ was one of the first G10 central banks to begin rapid policy tightening, and inflation has indeed slowed. However, in the process, demand has weakened, unemployment rose to 4.6% in Q2 24 (the highest rate since early 2021), and the economy has all but reached a standstill over the last two years (real Gross Domestic Product contracted by 0.2% in Q2 24) with a shallow technical recession seen in the second half of 2023. Markets will receive the latest CPI inflation (Consumer Price Index) data from New Zealand next week – this is released every quarter – with the expectation that CPI inflation will ease back into the RBNZ’s target inflation band of 1-3% in Q3 24 (YoY) from 3.3% in Q2 24. Of note, however, this is tradeable inflation. Domestic inflation (or non-tradeable inflation) is a different story and is proving sticky; the latest release showed that non-tradeable inflation rose 5.4% in Q2 24 (YoY), down from 5.8% in Q1 24. NZD Lower Across the Board Today’s decision/forward guidance sent the New Zealand dollar (NZD) tumbling against G10 peers, with losses most notable versus the US dollar (USD) and Swiss franc (CHF) as of writing. Early London has the NZD trading a whisker north of daily lows versus the USD from NZ$0.6075, propelling the NZD/USD currency pair through a descending resistance-turned-support level (extended from the high of NZ$0.6369). The decision point zone at NZ$0.6035-NZ$0.6056 calls for attention and may see traders begin locking in some profit if the area is tested, given the sell-stops tripped south of the higher low formed at NZ$0.6106 (11 September). The next major support level beyond the decision point to consider is around NZ$0.5991. Overall, per the above structure, the pairing demonstrates scope to continue exploring lower levels.
Short
by FPMarkets
NZD/USD Drops as Odds of RBNZ Rate Cut Increase, What's Next?"Since the 18th of July, NZDUSD has dropped for 6 consecutive days. This is due to the increased expectations of a rate cut by RBNZ in the upcoming meeting (14th of August). What should we expect as the NZDUSD is approaching the 0.58600 support zone? 1. Current Situation Fundamental Analysis: - Expectations of interest rate cuts in August by RBNZ are rising (near future expectation of weakening NZD). - FOMC is expected to hold interest rates in August, but there is an expectation of 3 cuts soon (near future expectation of a stable USD). Technical Analysis: - NZDUSD is approaching the 0.58600 support zone, there might be a rebound as buyers enter the market and pause the drops. 2. Key Levels to be Aware Of Support Zone: - 0.57700 to 0.58000. If the price can hold above these figures, NZDUSD might have a chance to rebound. If the price breaks below the 0.57700 support zone, there will be a high chance that NZDUSD will continue a downtrend until it hits the next support at 0.55200. Short-term Resistance: - If the price rebounds, the nearest (short-term) resistance will be at 0.60500, followed by a stronger resistance at 0.62000. 3. Things to be Aware Of RBNZ & FOMC Policy Announcements: Any forthcoming statements or decisions from the RBNZ or FOMC will be crucial. For RBNZ, a confirmed rate cut or dovish tone could push the pair lower, while a more neutral tone could support a recovery."
by ThinkMarkets
NZD/USD Outrageously OverBought NZD's newfound strength is artificial for the most part. Let's analyze: New Zealand's GDP report showed to be better than expected, but let's put that into perspective. In Q2, their GDP was revised down and you want to convince me that this 0.7% quarter growth is significant. The yearly GDP growth is still on a convincing downtrend. Many Banks still have the RBNZ down as giving a rate cut at the start of the year. Inflation is not where they want it to be. Yes, the trade war is making progress which is a natural provider of currency strength to the NZD. However, this is not enough substance to justify the strength of the current bull run. The ridiculousness is showcased in the RSI(14) which is showing 2-year highs. Expecting a sharp decline at the start of the trading week. Disclaimer: I am not your financial advisor.
Short
by TogamiTrader
2
Kiwi underperforms as investors bet that RBNZ will cut rates oveExpectations at time of writing, drawn from short-term rate futures, imply an 80% chance that the RBNZ cut of a -25 bps on Wednesday, with the rest of the 20% attributed to a hold. Although inflation has subsided, the softening employment situation and weak business confidence suggest that further easing is warranted, a decline in NZD and an improvement in the housing market may allow politicians to stay out this month. We believe that even if RBNZ leaves interest rates unchanged, the continuing uncertainty in the region should keep the bank dovish and the risk for NZD is downside. After that though, the currency’s direction will depend on the signals about future easing. If the RBNZ holds the interest rate, it can catch many people unprepared and this would probably be the most bullish scenario for the NZD pairs. In that case we can see NZD/USD to test 0.6400 resistance. If the interest rate is reduced (as expected), but still the bank refrain from being overly dovish, then it could print a minor rebound. With a dovish cut, we can see a break below $ 0.6320. Purely technically, NZD/USD has been trading in a downward price channel since early November on the four-hour chart. The channel model was formed on November 4. Earlier this morning, the NZD tested the 0.6365 resistance zone formed by the upper trend line of the bearish channel and the 200-day EMA on the four-hour chart, but stepped back. If this resistance area continues to hold, then intraday signals remain in favor of the bears and we can watch the trade continue within the downside channel before the decision tomorrow.
Short
by ForexTrendline
EURO VS KIWI (EUR/NZD) Mid Term Trade Strategy & PlanRBNZ Expectations Survey , which featured downgraded official cash rate and inflation estimates, the Kiwi gave a fresh bearish trigger in the Asian trading session. Real interest rate cut for the RBNZ decision this week has been boosted by this report, so it wouldn't be shocking if London session traders were to start positioning by today. Earlier on, the pair bounced off the support at their ascending channel and distance, but might still have some bullish momentum higher for another split. Nonetheless, a step past the top of the channel could see a limited upside at the resistance level of 1.7500 The economic schedule shows that the eurozone has ZEW Economic Sentiment figures up for release, and forecast expected good from Germany and the entire region. If it's for real then this cross-currency could fly higher, especially with risk aversion creeping in ahead of Trump’s trade speech. Moving averages reveal that EURNZD is safely in the bullish territory in short terms. Talking about the average volatility over the past 30 days that tells pair moves around 110 pips per day. Dip back to the channel support around 1.73313 could be a good long entry area, with a stop below the weekly S2 of pivot 1.72767 (around the previous low of Nov 4). I have a bullish bias and have a plan to enter (if we get chance) from the bottom of the ascending channel but as we can see there some levels which our arrows in the chart pointing out for potential reversal zone (PRZ) and one can jump in and out of the trade depending on how the market news which are concerned to this two currency releases and how it shifts in sentiment and price action for this cross pair throughout the remaining days of the week. Happy Trading!
Long
by Anatta0
AUDNZD - Extremely overbought - RBNZ in spotlightHello Traders, This week the RBNZ will decide if they will hold interest rates steady after they look a 50 basis point cut during their last meeting. This shocked the market as they had forecast only a 25 basis point cut previously, therefore the NZD took a larger loss. This week the RBNZ is expected to hold rates steady, on the other hand, the RBA is looking at an additional rate cut. This means we could see some strength going back into the NZD. The AUDNZD is also extremely overbought, as you can see this has provided a great opportunity to sell from previously. Keep in mind: If the RBNZ do cut interest rates rates, this trade will not work out. Any questions or comments please let us know, www.forexstoreau.com
Short
by ForexStoreau
Gold new all-time high in NZD termsThanks for viewing, After last weeks unexpectedly deep 50 basis point cut by the RBNZ the NZD has lost ground against USD www.ft.com Against a back-drop of a very bullish gold/USD price this has resulted in gold breaking its 2011 all time high. I get the feeling that the a new monetary easing policy (QE4?) is around the corner from the Fed, so we are at the start of a new easing cycle. If we are at 1% rates (this is a negative real interest rate. Inflation is 1.9% presently tradingeconomics.com) at the start of an easing cycle, then negative (nominal - not just interest rates below inflation) interest rates are a very real possibility. We may be approaching a time in New Zealand that it will be much more prudent to keep your cash in a safe, instead of paying banks to hold it for you. This happened in Japan and can happen in Australia and New Zealand as well: www.scmp.com Remember that the RBNZ holds no precious metals (bulk sold in 1960s and the balance sold in 1991) and all of its assets are foreign currency cash assets www.rbnz.govt.nz Expect all of those cash assets to reduce in real purchasing power while gold continues to climb. Protect those funds everyone.
OANDA:XAUNZD
by flyinkiwi10
SELL NZDUSD - RECONFIRMED BY 12M HIGHS? CPI PRINT EYED CLOSELYAlso as additional technicals to support the short NZD$ view: 1. On the daily and NU currently Trades close/ at to its +2 standard deviation lines, these are highly resistive. - Assuming NU trades mean reverting +2SD means there is a 95% chance of a price reversal/ 95% of all prices should be below the +2SD channel lines (e.g. NU highly likely lower from here). -- And as you can see by the Yellow circle highlights NU has held this +/- 2SD discipline in the past so is highly likely to maintain these levels in the future. 2. Also NU trades significantly above its 60, 120, and 250 Moving Averages on 1h, 4h, 1D, 1wk - this also signals strong overbought prices, where selling has a higher probability of success. 3. NZD$ looks to have confirmed the 0.73 12 month high level as resistance - strong pivot point. 4. The strong 100k+ print beat from NFP last week imo didnt price much into NZD$ downside at the time, however given the reaction in the Fed Funds rates market, it may be pricing now as the market now implies a 25bps hike at 5.9% Sept/ Nov vs 0% prev, 22.5% Dec vs 18.5% prev - 50bps hike 1.1% vs 0% - also the probabilities of cuts all fell significantly across the curve. 5. Risks to the view continue to be a hawkish RBNZ - as we saw last week the short played well but was undermined at 0.70 when RBNZ speaker highlighted the HPI issue and inferred the cut may not happen in Aug as a result (Hence the recovery back to 0.73). - The rate cut went from 80% to 50% on the back of these comments imo - now NZD CPI inflation and employment readings in the coming 30 days serve as the determinant of their Aug decision, a flat or miss CPI print will likely mean the RBNZ will cut 25bps (CPI is the no.1 target), so beyond the 0.73 level resistance we look for certain confirmation in the CPI reading, though it will be difficult to know what the market is thinking/ to get ahead of the market in the lead up, where the short was a giveaway before the RBNZ's new comments were on the table. - Also on this point it is worth noting that given many of the worlds CBs have shifted to a dovish tone in light of the brexit vote (e.g. RBA BOE BOJ FOMC) this indirectly puts pressure on RBNZ to cut as Kiwi/ NZD will continue to appreciate causing disinflationairy pressures/ brakes to continue on the nzd economy, thus we also carry positive upside given the worlds policy positioning at the moment. Trading Strategy 1. Sell @0.726 TP 0.702 SL 0.732 - More aggressive shorts may be added if confidence in a cut is higher - a cut will send NU down to 0.67 at least for example. *Be sure to check the attached post "SELL NZDUSD @0.73 - TP 700PIPS: BREXIT, RBNZ, FED & USDJPY HEDGE" for NZDUSD short fundamentals*
Short
by QuantumLogicTrading
1