9 April 2024 | FXGT.com
NZD/USD Volatility Expected as Focus Shifts to RBNZ Decision and US CPI Data
- NZD Negative Business Outlook: The pair has experienced some pressure due to a significant decline in business confidence in New Zealand, with the NZIER Business Confidence index showing a 25% contraction for Q1 2024, indicating a more pessimistic view compared to the previous quarter.
- New Zealand’s Disinflation Priorities: Despite signs of disinflation, the Reserve Bank of New Zealand (RBNZ) Governor Orr emphasized after the February meeting that further efforts are necessary to tame inflation. The RBNZ’s stance indicates a preference to remain cautious, highlighting the economy’s limited capacity to handle unexpected inflation spikes.
- RBNZ’s Independent Stance: Historically, the RBNZ has demonstrated autonomy in its monetary policy decisions, often diverging from the actions and expectations surrounding other central banks, including the Federal Reserve.
- RBNZ Expected to Hold Rates Steady: The RBNZ is anticipated to keep the cash rate unchanged at 5.5% during its upcoming monetary policy meeting. This would mark the sixth consecutive meeting without a rate change, with the RBNZ signalling a restrictive stance to address inflation concerns.
- Rate Cut Expectations: Current market pricing suggests a 30% chance for a 25-basis point rate cut by the RBNZ by August, with a 90% probability of rate cute taking place by October.
- US CPI Data in Focus: The RBNZ’s decision coincides with the release of US CPI data, potentially leading to unpredictable market movements and the chance of initial reactions being reversed around the US CPI report release. The report is expected to reveal an increase in the headline CPI for March, while the core CPI, which excludes volatile food and energy prices, is anticipated to show a cooling trend.
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