NZD buoyed following shift in RBNZ policy bias

Daily Currency Update

The New Zealand dollar was the best performing major Wednesday as markets responded to the RBNZ’s latest policy offering. Policy makers issued a 25-basis point rate cut, a move that was widely anticipated and priced in ahead of the meeting allowing markets to shift their focus to the accompanying commentary. It quickly became evident that the cut came with a hawkish undertone as one member of the Monetary Policy Committee voted to leave rates on hold. Meeting notes showed the committee discussed the possibility of delaying further cuts to afford the Bank more time in assessing the impacts of economic and political uncertainties, leaving room to accommodate inflation driven by the US tariff agenda and supply side shocks. Rate modelling/tracking pointed to a shift away from the banks most recent easing bias that has delivered a 225-point rate adjustment in the 9 months since August with policy makers adopting a more neutral tone. The shift in bias caught markets off guard and helped drive the NZD higher. Having pushed back above US$0.5950 the NZD set a session high just north of US$0.5980 before settling nearer US$0.5960. With other majors offering little to excite investors the NZD traded higher against key crosses, advancing against the JPY, AUD, EUR and GBP.

Our attention today turns to the ANZ survey of business conditions while US GDP data, jobless claims and pending home sales dominate the international macroeconomic ticket.