New Zealand Dollar rebounds strongly after RBNZ surprised the markets by keeping OCR unchanged at 1.00%. There were some expectation of a cut to 0.75%. But RBNZ opted for a hold and just noted “interest rates will need to remain at low levels for a prolonged period”, and pledged to “add further monetary stimulus if needed.”
The RBNZ Committee noted “recent increases in wage and non-tradables inflation” as ‘expected outcome of monetary stimulus transmitting through the economy.” There was “slight decline in one- and two-year ahead survey measures of inflation expectations”. But “long-term inflation expectations remain anchored at close to the 2 percent target mid-point and market measures of inflation expectations have increased from their recent lows.”
Meanwhile the two options of keeping OCR at 1% versus lowering to 0.75% were debated. “Both actions were broadly consistent with the current OCR projection”. There was a consensus to stand pat. ” The Committee noted that the risks to the economy in the near term were tilted to the downside and agreed it would add further monetary stimulus if economic developments warranted it.”
NZD/USD’s strong rebound suggests that pull back from 0.6465 has completed completed at 0.6322, after breaching 0.6333 support briefly. Rise from 0.6203 might still be in progress. Focus is back 0.6465/6481 resistance zone. Sustained break there will be an early sign of medium term bullish reversal. On the downside, break of 0.6322 will retain medium term bearishness and bring retest of 0.6203 low first.
