3:00pm (NY Time) RBNZ Rate Decision Forecast 2.50% Previous 2.50%
ACTION: NZD/USD BUY 2.75% SELL Unchanged
RBNZ is expected to keep rates unchanged at the current level of 2.50% in this meeting, as unanimously agreed by all economists surveyed from different news media companies. As a matter of fact, aside from the bullish statement and hawkish tone during previous RBNZ rate statements from Governor Bollard, there seems to be no other fundamental reasons supporting a rate hike for NZD in the near future.
As a matter of fact, based on the fundamentals I’d even argue for a possible rate cut as the levels of exchange rate between AUD and NZD has reached new levels, along with high unemployment rates and almost every economic indicator, particularly in the manufacturing and retail sectors…
However, knowing that NZD traders will probably ignore fundamentals as it is likely to follow AUD and RBA’s monetary policy, it is still very possible that Gov. Bollard will hike rates as scheduled in June of 2010…
Therefore, the plan for tomorrow will be to wait for a surprise rate hike and get ready to jump in the market on a LONG NZD/USD trade… If we do not get that surprise rate decision, depending on the possible comments from Bollard we might see some limited volatilities in the market. Should Bollard remain optimistic over RBNZ’s monetary policy schedule, then we should look for a possible entry on LONG NZD/USD; if Bollard is unsure due to recent economic data, then expect to see NZD retest recent lows.
Henry Liu
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