NZD Slumps As RBNZ Considered A 50Bp Cut , USD/JPY Dip Supported As PM Kishida Bows Out

Outside of a sharp slump in NZD, post the RBNZ rate cut, aggregate G10 FX moves have been modest so far today. We did see some yen volatility, as PM Kishida announced he won't seek a second term, but net USD/JPY changes have been minimal.

• The RBNZ cut rates by 25bps, which wasn't fully priced by the market. There were significant downward revisions to the OCR path which is now 80bp lower by end-2024, 130bp by end-2025 and 60bp by end-2026 with the terminal rate still 3% in Q2 2027.
• The central bank also expects the economy to be in a recession at the moment, while RBNZ Governor Orr stated the board considered a 50bps cut today.
• NZD/USD initially stabilized in the 0.6030/40 region post the outcome, but fell further when Orr stated a 50bps cut was considered. We hit lows of 0.6006 and track just above this level in recent dealings. We opened today closer to 0.6075. Lows this week rest at 0.5990.
• AUD/USD has been relatively steady, last down slightly to 0.6625. The AUD/NZD cross is back above 1.1000, last near 1.1030, fresh highs back to the start of the month.
• USD/JPY was volatile today, tracking above 147.00 in early dealings, before falling to 146.08 after it was announced PM Kishida would not seek a second term in office. This appeared to pressure Japan equities somewhat, with some fresh uncertainty injected into the political outlook. Still, dips have been supported for both USD/JPY and Japan equities. The pair was last back near 147.00, little changed for the session.
• Looking ahead, all eyes will be on the US CPI print later.