The New Zealand dollar has been losing against the US dollar for five weeks. The NZD/USD exchange rate fell from 0.6785 to 0.6360, which was the largest decrease in this half-year. Monetary policy could have been one of the main factors affecting NZD`s weakness.
The Reserve Bank of New Zealand (RBNZ) has decided to cut the main interest rate from 1.75 percent to 1.5 percent already in May, then surprise the investors at the beginning of August with a cut of 50 basis points. The market expected a cut of only a quarter percentage point. As a result, the main RBNZ interest rate fell to a record low of 1 percent. After the decision of early August, the central bank stated that the cut in rates is aimed at supporting inflation amidst weakening global economic activity and persistent trade tensions. Moreover, it was signaled that further rate cuts could be possible. This could have a negative impact on NZD.
Currently, however, the situation has changed due to Friday statements of the Governor of the Reserve Bank of New Zealand. Adrian Orr said the central bank may see the impact of a 50 bps cut this month before considering further action. Orr added that the RBNZ will do everything to support the economy and will monitor the impact on inflation after an unexpectedly large rate cut this month before considering further easing.
This statement can be interpreted as a slight change of the RBNZ bias from the dovish to neutral for the time being. This, in turn, seems to affect the NZD/USD exchange rate, which is rising most of the major currency pairs this morning.
NZD/USD daily chart. Conotoxia trading platform
On the chart the lower limit in the main trend channel has been defended. The NZD/USD exchange rate has turned back twice after the test of the line drawn through the recent bottom. Nevertheless, to be able to talk about a more permanent change in trend in this market, the NZD/USD currency pair would have to break the nearest resistance 0.6423 and 0.6484. It should also be remembered that today the speech of Fed Chairman Jerome Powell at the symposium in Jackson Hole, which is scheduled for 4 pm. may affect the US dollar.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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