RBNZ leave rates unchanged after series of dovish cuts
The Reserve Bank of New Zealand kept interest rates unchanged at 1.00 percent earlier today as widely expected, following a series of recent rates cuts from the central bank. RBNZ policymakers signaled that more rate cuts may be needed later this year to shore-up New Zealand’s struggling economy.
Following August’s shock fifty basis point rate cut, the RBNZ decided to hold rates steady as the recently weakened New Zealand Dollar is helping to boost exports and overseas investment. The RBNZ policy statement also noted that significant risks still remain to the domestic economy from the ongoing Sino-U.S trade war.
Many economists are now speculating that unless New Zealand’s economy starts to pick-up dramatically, then a further twenty-five basis point interest rate cut could come as soon as November this year. Another twenty-five basis point would then take the benchmark interest rate down towards a record-low, 0.75 percent.
The next key event for the New Zealand economy and the New Zealand Dollar is the third-quarter inflation report, which is released on October 15th. The inflation report could well decide the direction of interest rates for the rest of 2019, especially if the headline figure misses the central banks 2.00 percent inflation target.
Last months shock fifty basis point rate cut from the New Zealand central bank had pushed the New Zealand Dollar to multi-year trading lows against the U.S Dollar. Just last week the NZD/USD pair tumbled to its lowest trading level since September 2015, as the FOMC policy statement sounded less dovish than financial markets had been expecting.
NZD/USD Daily Candlestick Chart | Source: ActivTrader
The next major support level for kiwi traders is the 0.6200 level, which is basically the only form of notable technical support before the 0.6000 level is exposed. To the upside, major near-term technical resistance is now found at the 0.6348 and 0.6410 levels.
Written by Nathan Batchelor, External Analyst, ActivTrades
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