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Kiwi forced lower as Fed unlikely to cut rates again before year end

NZD - New Zealand Dollar

The New Zealand dollar fell through trade yesterday, forced lower in the wake of the Fed’s monetary policy announcement. The Fed elected to issue a 25-basis point cut to interest rates, a move widely anticipated and priced in by most analysts. In the wake of the cut markets focus shifted to Fed President Powell’s statement as a new marker for direction. Powell stressed the US outlook remained solid indicating moderate interest rate adjustments would be all that was needed to keep the economy on track. These comments left markets wanting and were considered hawkish when compared with expectations, allowing the USD to rally across the board and sending the NZD toward intraday lows at 0.6300 before supports lended some relief and helped the Kiwi edge higher.

With little movement in key crosses attentions now turn to quarter two GDP data. We saw downside risk to market estimates at 0.4 and a miss in projections could have forced the NZD below supports at 0.63 as the likelihood of additional monetary policy easing increased. The read however came in marginally above broader expectations at 0.5%, in line with RBNZ projections. The upside surprise helps solidify supports at 0.63 and helped the kiwi jump back toward 0.6330 at time of writing.

Key Movers

The USD advanced across the board on Wednesday buoyed by the commentary that followed the Federal Reserve’s monetary policy decision. Investors had anticipated the Fed would cut rates by 25 basis points and the decision to loosen financial conditions had little impact on USD value, instead it was Fed President Powell’s commentary in the wake of the policy announcement that forced investors hands. Powell stressed the outlook remained strong and the moderate policy changes were adequate in sustaining growth. When compared with the Fed’s dot plot of appropriate monetary policy projections and the likelihood of additional cuts into the end of the year have diminished. The dollar index is up three tenths of one percent at time of writing and looks set to extend gains beyond 98.50.

Expected Ranges

NZD/USD: 0.6290 - 0.6370 ▼

NZD/EUR: 0.5710 -0.5780 ▼

GBP/NZD: 1.9630 -.1.9880 ▲

NZD/AUD: 0.9220 - 0.9320 ▼

NZD/CAD: 0.8380 - 0.8430 ▼