Yesterday’s RBNZ meeting left the Official Cash Rate (OCR) unchanged at 1.75 percent. Its Statement noted, “The exchange rate has eased since the August Statement and, if sustained, will increase tradables inflation and promote more balanced growth... Employment growth has been strong and GDP growth is projected to strengthen, with a weaker outlook for housing and construction offset by accommodative monetary policy, the continued high terms of trade, and increased fiscal stimulus”.
This is all pretty standard stuff and, indeed, could have been written by virtually any Central Bank in the world right now. What piqued the interest of the FX market was the RBNZ’s quarterly forecast track for its official interest rate. A quick look at this showed the Bank now sees rates rising in Q2 2019 rather than in Q3 2019 as it had previously forecast. In reality this is a tiny shift and we’re still talking 18 months away, but it was enough for the Kiwi Dollar to catch a bid immediately after the numbers were released.
After a high of USD0.6971 in the local time zone on Thursday, it went on to a best level of 0.6975 in London. Since then, however, the currency has done little more than track the fortunes of the Aussie Dollar. AUD/NZD has been trapped in less than a 30 pip range from 1.1018-1.1045 for the whole of the past 18 hours with little or no investor interest to trade the pair ahead of today’s RBA SoMP.