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Kiwi bolstered by RBNZ decision to keep rates on hold

NZD - New Zealand Dollar

The New Zealand dollar was bolstered yesterday by the surprise decision to keep interest rates on hold at benchmark lows of 1%. Opening Wednesday morning at 0.6328, the local currency strengthened during intraday movements by over 1% for the day, hitting highs of 0.6416.

Market analysts had a majority view surveyed by Bloomberg that a 25bps cut was expected by the RBNZ in November’s policy rate meeting. The bank noted that since a 50bps cut in August there was no need to stimulate the economy further and is likely to take a wait and see approach as to how earlier cuts will filter through to the economy.

RBNZ Governor Orr testified this morning on the latest Monetary Policy Statement before the Finance and Expenditure Select Committee in Wellington. Orr commented that interest rates needed to stay low for a long period of time and the RBNZ will do the needful to meet inflation targets as cutting rates were debated.

The New Zealand dollar opens this morning at 0.6411. We expect support levels to hold on moves approaching 0.6370, while any upward push will likely meet resistance at 0.6460.

Key Movers

The U.S Dollar was higher overnight following the release of a favourable inflation print for the month of October in the United States. Consumer prices rose to a seven-month high of 0.4% m/m on a seasonally adjusted basis and to 1.8% y/y.

Federal Reserve Chairman Jerome Powell overnight testified before the Joint Economic Committee in Washington and hinted that rate cuts are unlikely and will keep interest rates unchanged over the coming months. Powell noted a stronger labour market and expansion of economy activity to boost the US Dollar Index (DXY) to overnight highs of 98.45.

Drifting away from Brexit themes in the UK, Inflation data decreased to 1.5% in October and a three year low as energy bill caps kicked in. House prices in the UK increased by 1.3% over the year to September 2019 and unchanged for the previous month. Cable was relatively unchanged following the release of data overnight pushing slightly lower to 1.2850 on open this morning.

Expected Ranges

NZD/USD: 0.6370 - 0.6460 ▲

NZD/AUD: 0.9340 - 0.9430 ▲

GBP/NZD: 1.9900 - 2.0300 ▼

NZD/EUR: 0.5790 - 0.5860 ▲

NZD/CAD: 0.8460 - 0.8540 ▲