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NZD: NZD/USD Jumps 1% Following RBNZ Meeting

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  • NZD/USD rose 1.03% to 0.5894 on Wednesday. The RBNZ cut its OCR by 50bps to 4.25% in November, citing easing inflation (2.2% in Q3) and concerns over weak domestic economic activity, including contracting GDP (-0.2% in Q3), rising unemployment (4.8%), and subdued credit demand.
  • RBNZ projects modest GDP growth resuming in Q4 2024, with inflation stabilizing around 2% by 2026. Governor Adrian Orr defended the cut as necessary to maintain price stability and hinted at further easing in February. The NZD initially spiked but later retreated, particularly against the yen, as markets digested Orr's dovish tone.
  • RBNZ officials told parliament they are confident about further rate cuts in 2025 as the cash rate returns to neutral levels, though incoming US tariffs under President Trump add uncertainty, with inflationary yet growth-dampening risks. Chief Economist Paul Conway noted the bank has not formally modeled Trump’s tariff impacts and stated it is too early to assess whether the prior OCR hikes were optimal but emphasized the RBNZ’s disinflation forecasts have been accurate so far.
  • The OIS market has 43bps of cuts priced in for the Feb meeting, and a cumulative 96bps of cuts priced in through to October 2025.
  • Taking a look at technical levels, initial support is 0.5797 (Nov 26 lows), a break here would open a move to the 2023 lows of 0.5774. Initial resistance is 0.5915/0.5920 (20-day EMA/Nov 20 highs), above here 0.6000 (50-day EMA).
  • later today we have ANZ Activity Outlook & ANZ Business Confidence
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  • NZD/USD rose 1.03% to 0.5894 on Wednesday. The RBNZ cut its OCR by 50bps to 4.25% in November, citing easing inflation (2.2% in Q3) and concerns over weak domestic economic activity, including contracting GDP (-0.2% in Q3), rising unemployment (4.8%), and subdued credit demand.
  • RBNZ projects modest GDP growth resuming in Q4 2024, with inflation stabilizing around 2% by 2026. Governor Adrian Orr defended the cut as necessary to maintain price stability and hinted at further easing in February. The NZD initially spiked but later retreated, particularly against the yen, as markets digested Orr's dovish tone.
  • RBNZ officials told parliament they are confident about further rate cuts in 2025 as the cash rate returns to neutral levels, though incoming US tariffs under President Trump add uncertainty, with inflationary yet growth-dampening risks. Chief Economist Paul Conway noted the bank has not formally modeled Trump’s tariff impacts and stated it is too early to assess whether the prior OCR hikes were optimal but emphasized the RBNZ’s disinflation forecasts have been accurate so far.
  • The OIS market has 43bps of cuts priced in for the Feb meeting, and a cumulative 96bps of cuts priced in through to October 2025.
  • Taking a look at technical levels, initial support is 0.5797 (Nov 26 lows), a break here would open a move to the 2023 lows of 0.5774. Initial resistance is 0.5915/0.5920 (20-day EMA/Nov 20 highs), above here 0.6000 (50-day EMA).
  • later today we have ANZ Activity Outlook & ANZ Business Confidence