As unanimously expected by economists, the Reserve Bank of New Zealand held its cash rate at 2.50%. The central bank said that although domestic households “remain cautious” and business spending continues to be “weak”, the central bank continues “to expect the New Zealand economy to recover in line with or slightly faster than our March statement projections”. The RBNZ added that they “expect to begin removing policy stimulus over the coming months”, contingent on the recovery progressing as expected. Following the announcement, NZD/USD spiked by around 0.25 U.S. cents to $0.7233USD, an early session high, before falling to $0.7176USD. The short-lived rally can be explained by the central banks’ comment that rate hikes are scheduled for the “coming months” and the statement that the recovery is recovering “in line or slightly faster” than predicted in March. However, the ensuing weakness in the currency was probably in reaction to the more negative aspects of the statement.
NZD/USD See-Saws Dramatically as RBNZ Holds Rates & Signals Rate Hikes in the “Coming Months”
As unanimously expected by economists, the Reserve Bank of New Zealand held its cash rate at 2.50%. The central bank said that although domestic households “remain cautious” and business spending continues to be “weak”, the central bank continues “to expect the New Zealand economy to recover in line with or slightly faster than our March statement projections”. The RBNZ added that they “expect to begin removing policy stimulus over the coming months”, contingent on the recovery progressing as expected. Following the announcement, NZD/USD spiked by around 0.25 U.S. cents to $0.7233USD, an early session high, before falling to $0.7176USD. The short-lived rally can be explained by the central banks’ comment that rate hikes are scheduled for the “coming months” and the statement that the recovery is recovering “in line or slightly faster” than predicted in March. However, the ensuing weakness in the currency was probably in reaction to the more negative aspects of the statement.
