NZD
The RBNZ cut its OCR by 50bps to 4.75%, accelerating its easing cycle to counter the country's economic slowdown. This move, anticipated by most economists, follows a 25bp cut in August. The RBNZ cited weak economic growth, rising unemployment, and falling house prices as reasons for the cut, while inflation is slowing and could undershoot its target. RBNZ dated OIS is pricing in 51.3bps of cuts at the next meeting in November, while Citi now expect a 75bps cut.
- The NZD has weakened against all G10 currencies, with the NZD/USD falling 0.75% to 0.6093. The pair has now fallen below all key moving averages, and below major support at 0.6100 (50% retracement of July 25 to Sep 30 rally), with next support now seen at 0.6057 (61.8% retracement).
- The AUD/NZD is 0.63% higher at 1.1055 making new cycle higher although further upside could be capped by the large sell-off in Chinese equities, with major benchmarks trading 5-10% lower. The cross has broken above the Aug 15 highs, with next resistance seen at 1.1100.
The NZ-US 2yr swap is trading 3bps lower at -19.5bps, back at March 2020 levels, while the AU-NZ 2yr spread is 2bps higher at 28bps, the highest levels since March 2013 highs, see chart.
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