reserve bank of new zealand

The major FX pairs further extended their losses earlier this morning, before rebounding to turn green on the day as North American participants slowly made their way to their trading stations.

With the US mid-term elections out of the way, investors’ focus will slowly return to global economics and away from US politics slightly.

As another volatile week is about to conclude, equity markets were coming under a bit of pressure and were giving back a big chunk of their gains from earlier in the week.

Falling in the awkward post-US, pre-Asian session, the Reserve Bank of New Zealand will deliver its quarterly monetary policy statement in just a few hours (21:00 GMT).

The Reserve Bank of Australia (RBA) will make its rate decision in the early hours of Tuesday, which makes the Aussie the main focal point during the Asian session.

The RBNZ is widely expected to keep interest rates unchanged at 1.75%. It last changed rates back in November 2016, when the benchmark Official Cash Rate (OCR) was trimmed from 2.0% to its current rate. Unless the RBNZ hints at a near future hike, the NZD/USD could extend its declines further.

The primary market themes for the past week have been weaker-than-expected inflation pressures, a surge in the energy sector due in part to a planned US withdrawal from the Iran nuclear deal, and a partial reduction in geopolitical risk concerns due to North Korea’s apparent display of cooperation in releasing hostages ahead of US/NK June talks.

As the US dollar took a bit of a breather on Wednesday after a prolonged, three-week rally, kiwi traders were positioning ahead of the Reserve Bank of New Zealand’s rate decision, monetary policy statement, and press conference, all scheduled for Thursday morning in Wellington (Wednesday evening in New York and London).

With the Federal Reserve decision and US monthly jobs report out of the way this past week, currency markets are looking next to two other key central banks that will be reporting their latest policy decisions in the week ahead – the Bank of England and the Reserve Bank of New Zealand.

The past week saw market volatility stabilize from previous weeks as both the US dollar and equity markets sought direction amid continuing concerns over the potential for a global trade war.

The week ahead will be slower in terms of economic data than the past week. Contributing to this slowdown will be the major Thanksgiving holiday in the U.S. Aside from speeches by heads of key central banks, including the European Central Bank, Reserve Bank of Australia, Federal Reserve, and Swiss National Bank, the week will be dominated by the release of minutes from several central bank meetings.

The Reserve Bank of New Zealand will be releasing its rate decision and monetary policy statement on Thursday in Wellington, followed by a highly-anticipated press conference.

After such a busy week of currency-moving events, the week ahead slows down considerably, but still features two major central bank decisions – the Reserve Bank of Australia (RBA) on Tuesday and the Reserve Bank of New Zealand (RBNZ) on Thursday.

The New Zealand dollar was pummeled on Thursday after the New Zealand First party opted to form a coalition government with the Labour Party, led by newcomer and incoming Prime Minister Jacinda Ardern, rather than with the incumbent Nationalist Party led by current Prime Minister Bill English. Concerns surrounding this new government with respect to the New Zealand dollar center on fears that such a coalition would work towards more growth-oriented central bank reforms that will likely result in a sustained period of lower interest rates from the Reserve Bank of New Zealand (RBNZ).

This week features the potentially pivotal 19th National Congress of the Chinese Communist Party, which begins on Wednesday. Developments during this major meeting of top government leaders in the world’s second largest economy could make a significant impact on the Chinese yuan, Australian dollar, and US dollar, among others.

The US dollar continued to rise broadly against other major currencies on Tuesday as higher expectations of Federal Reserve policy tightening helped to extend the dollar’s recent recovery from multi-year lows. The New Zealand dollar was just one of the many currencies that fell sharply to US dollar strength, extending the kiwi’s fall against the greenback in the wake of an inconclusive New Zealand general election that took place over this past weekend. The election saw no clear majority winner, which will prompt the eventual formation of a governing coalition and the uncertainty that comes with that. A key upcoming event this week that has the potential to impact NZD/USD further will be the Reserve Bank of New Zealand’s policy decision and rate statement scheduled for this Thursday in Wellington.

Amid the highly anticipated start of the Jackson Hole symposium on Thursday and speculation over key speeches to be delivered by Fed Chair Janet Yellen and ECB President Mario Draghi on Friday, the US dollar has remained relatively flat and in a tight trading range this week. One notable exception to this flatness has been the NZD/USD currency pair. Against the New Zealand dollar, the US dollar has extended its strength, pressuring NZD/USD down to a major support area around 0.7200 as of Thursday.

The AUD/NZD has retreated noticeably in recent weeks. The NZD has been supported by a slight improvement in New Zealand data and thanks to firmer dairy prices, while the AUD has been undermined by slumping metal prices. The Reserve Bank of New Zealand will be making its latest policy decision tonight and the focus of the FX markets will be on the NZD as a result.

The US dollar has extended its bounce that began at around the start of the month as the Dollar Index’s stay beneath 100 proved to be temporary. Consequently, the EUR/USD, GBP/USD and basically everything else against the dollar has fallen sharply today. Meanwhile, the NZD has sold off in part due to news that the RBNZ’s Governor Graeme Wheeler will step down when his term ends in September.

Next week is all about this Australian and New Zealand dollars. We will hopefully find out which of the two currencies is stronger relative to the other one as central banks of both nations have their policy decisions

The New Zealand dollar has so far been able to hold its own relatively well against the dollar despite the latter breaking to new multi-year highs against the likes of the euro and Swiss franc, and multi-month highs vs. the yen. But the bullish days for the NZD/USD could be numbered.

For obvious reasons, the focus in the FX markets is on the dollar this week. Much has been said about it: if Clinton wins, this will happen and if Trump wins that will happen. The truth is, no one knows what will actually happen, though we can have a good idea about what may happen. Now if you are like me, you cannot wait for the elections to be over so that we can actually concentrate on the US economy again and not on politics. If you are like me, you also wouldn’t like to be heavily-exposed to the dollar in the run up to the elections. This is when some FX crosses come handy. One such pair is the NZD/JPY, though it is not entirely immune to US elections, for it is considered to be a risk-sensitive FX pair.

The New Zealand dollar’s recent advance has come to a halt recently after the Reserve Bank of New Zealand suggested that interest rates may need to be cut further from their current record low of 2.0%. The NZD’s retreat has been particularly noticeable against the Australian dollar as the AUD/NZD pair has surged back above 1.0500 after dipping to as low as 1.0240. It looks like the US dollar is also now getting the upper hand on the New Zealand dollar, even though the former has weakened against many other currencies recently, including the Aussie.