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Kiwi lower as investors prepare for RBNZ rate cut

NZD - New Zealand Dollar

The New Zealand dollar shifted lower through trade on Tuesday losing 50 points following a downward revision in inflation expectations ahead of today’s RBNZ policy meeting. The Kiwi retraced recent outperformance following the reduction in price pressures affirming expectations the RBNZ will reduce bench market interest rates later today.

Having found support at 0.6330 attentions turn to today's monetary policy announcement. Most analysts have priced in a 25 basis point interest rate cut, with investors keenly attuned to the accompanying monetary policy statement for further direction. There is a broader sense that should the RBNZ cut rates a period of interest rate stability will and should follow. The 50 basis point cut pushed through in August has had little real impact, failing to stimulate broader economic performance and in many ways dampening broader market optimism. While we expect a rate cut to have short term negative impact on the value of the NZD and force investors to test resistance at 0.63, the impact to the long end of the yield curve will be largely muted affording room for a bounce once initial moves are absorbed.

Key Movers

The US edged marginally higher through overnight trade supported by a shift in risk demand as US president Trump doubled down on recent aggressive trade rhetoric. His comments forced a small shift toward haven assets with much of the market immune to his boastful soundbites. Instead attentions turn to tonight CPI inflation print and Friday’s retail sales read for further direction.

The GBP shifted lower through trade on Tuesday, edging lower against both the EURO and USD as the gloss that followed the Brexit Parties decision to not contest key conservative seats at the upcoming election bolstered hopes a majority government will be formed and a no deal Brexit avoided. While Monday’s announcement eases some of the uncertainty there are still significant headwinds ahead for sterling and we anticipate it will continue to fluctuate as headline news hits the wires.

Expected Ranges

NZD/AUD: 0.9180 - 0.9375 ▼

NZD/CAD: 0.8305 - 0.8495 ▼

NZD/EUR: 0.5665 - 0.5880 ▼

GBP/NZD: 1.9665 - 2.0620 ▲

NZD/USD: 0.6255 - 0.6410 ▼