When is the RBNZ and how it could affect NZD/USD?

Early Wednesday at 02:00 GMT market sees monetary policy decision by the Reserve Bank of New Zealand (RBNZ). Following the central bank’s fireworks in July, NZD/USD traders are all eyes on the monetary policy meeting outcome despite expecting no change in the current measures that offer Official Cash Rate (OCR) of 1.0%.

It should also be noted that the latest statements from the RBNZ Governor have been in favor of a no change in the present monetary policy after announcing a surprise 0.50% rate cut in July. However, uncertainty surrounding US-China trade deal and not so hawkish fundamentals from New Zealand continue pushing market players to expect one more rate cut from the central bank in 2019.

Westpac aptly portrays the market sentiment as it’s latest report says,

“Markets price only a small risk of the RBNZ following up its shock -50bp rate cut with another -25bp today (12pm Syd/10am Sing/HK). Far more likely is a steady hand at 1.0% though the brief statement should leave open the possibility of further easing. Our base case is -25bp on 13 November.”

Scotia Bank points catalysts behind the expected no change in RBNZ monetary policy,

“(RBNZ) unanimously expected to hold its official cash rate. Inflation was last reported for Q2 back on July 15 at 1.7% y/y and below the 2% mid-point of the 1-3% target range. The Q3 inflation reading isn't due out until October 15th. Q2 GDP growth was recently released and slightly surpassed expectations. The RBNZ may prefer to hold its firepower until it sees the next set of inflation readings. That could make November 12th the more likely 'live' meeting.”

Impact on NZD/USD

Given the most market expectations favoring a no change in monetary policy, coupled with an intact bearish bias, surprisingly positive comments in the rate statement or a rate cut could trigger heavy momentum of the New Zealand Dollar (NZD). In absence of any such moves, the Kiwi pair can extend its latest pullback amid doubts over the US-China trade deal and markets’ risk-off mood.

Technically, the bearish signal from 12-bar moving average convergence and divergence (MACD) and sustained trading below the 10-day exponential moving average (EMA) near 0.6330 can keep dragging the quote towards 0.6270 and the monthly bottom close to 0.6255, followed by multi-month old falling support-line near 0.6225. Alternatively, pair’s successful break of 0.6330 can aim for September 10 low nearing 0.6410.

Keynotes

NZD/USD ignores weaker than forecast NZ trade balance with all eyes on RBNZ

About the RBNZ interest decision and statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.