Home Daily Commentaries NZD forced lower as RBNZ cuts rates

NZD forced lower as RBNZ cuts rates

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Thursday 20 February, 2025

Daily Currency Update

The New Zealand dollar traded lower Wednesday after the RBNZ cut rates by 50 basis points and set a clear bias to further easing. Policymakers met market expectations and lowered the overnight cash rate to 3.75% while downwardly revising its anticipated cash rate track to account for 25 basis point rate cuts at the next two monthly meetings. With the decision largely anticipated, the NZD managed to maintain supports on moves approaching US$0.5680. Having recovered back above US$0.57 through early offshore trade, the NZD slipped back toward this key pivot point as risk sentiment faltered following comments from President Trump on Truth social. Trump’s tirade labelled Ukrainian President Zelenskiy a dictator and blamed Ukraine for the prolonged conflict. The comments shocked markets and the NZD slipped back toward an overnight low of US$ 0.5694 and opens this morning only marginally above this level.

Our attentions today remain with geopolitical headlines and US jobless claims as markers for direction through trade on Thursday.

Key Movers

The US dollar was broadly stronger through trade on Wednesday, advancing against most G10 currencies despite a modest fall in US treasury yields. With little of note by way of headline macroeconomic data, attentions were again affixed on President Trump as he offered further insight into his administration's tariff plans. Trump said he expects to impose a 25% tariff on cars, semiconductors and pharmaceutical imports, while at the same time souring hopes of an early end to the Russia/Ukraine war. Trump made comments about Ukrainian President Zelenskiy and about Ukraine of taking advantage of US Aid, insinuating they were to blame for the ongoing conflict. The comments posted on Truth Social prompted a correction across risk assets and a reversal across equities. The euro traded sharply lower, sliding below 1.0450 and toward 1.0400 before finding support and settling near 1.0420 ahead of open this morning.

In the UK, CPI inflation data printed above median estimates, finding a new 10-month-high. With both headline and core inflation accelerating, markets tempered their Bank of England rate cut expectations. There was little reaction across currency markets, with Trump's comments on Ukraine dominating attentions. Sterling fell on 0.15% on the day, sliding below 1.26, touching 1.20567 before finding support.

The yen was the day's best performer, buoyed by the decline in US yields following the FOMC meeting minutes for January and the decline in risk sentiment.

Our attentions turn now to US jobless clams and China's loan rates.

Expected Ranges

  • NZD/USD: 0.5650 - 0.5750 ▼
  • NZD/EUR: 0.5400 - 0.5500 ▲
  • GBP/NZD: 2.1950 - 2.2250 ▼
  • NZD/AUD: 0.8950 - 0.9050 ▲
  • NZD/CAD: 0.8050 - 0.8150 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.