When the Reserve Bank of New Zealand (RBNZ) changes its policy stance, it normally does so with complete transparency and succinctness, as was the case today. The Reserve Bank of New Zealand (RBNZ) startled investors by ending its buying program next week. NZD/USD then surged higher, recapturing the 0.70 level. According to MUFG Bank experts, the kiwi will continue to be supported.” The RBNZ said that QE would be phased out by July 23rd, and that it would no longer require “considerable time and patience” to achieve its monetary policy goals. The Reserve Bank of New Zealand (RBNZ) indicated in May that the first rate hike could occur in H2 2022. This means that a rate hike is almost certain to happen this year.”
“We must not underestimate the magnitude of the change that has occurred today. The RBNZ today declared that “the level of monetary stimulus could be decreased to lessen the risk of not reaching its mission,” as opposed to requiring to sustain stimulus to meet its objectives. That’s a significant change in danger.”
“The magnitude of today’s movement gives the RBNZ plenty of room to act before November. The 18th of August and the 6th of October are now both live meetings, and the magnitude of the shift leads us to assume that a move in August or October will give additional NZD support.”
“Given the current RBA expectation of no rate hike until 2024, market investors who are hesitant to sell the US dollar may benefit by selling the AUD/NZD. We doubt such advice will last much longer, but the policy gap between the RBA and the RBNZ has grown even wider. The only caveat is that long positioning in NZD is already quite extensive.”/n
