Post ReplyThe New Zealand dollar has pulled back sharply to a nearly 2-year low as the Reserve Bank of New Zealand cut rates more than expected by 50bps to 7.50 percent. This is the second rate cut in a row by the central bank, as the move was exacerbated by the post-meeting press release issued by RBNZ Governor Alan Bollard. Indeed, Mr. Bollard said that "it is appropriate to move towards a less restrictive monetary policy stance," suggesting that they will continue cutting rates in the future as weakening economic activity is "expected to translate into lower inflation pressures in the medium term." This sentiment has left Credit Suisse overnight index swaps to continue pricing in 150bps worth of cuts by the RBNZ over the next 12 months.
NZD/USD has taken a dive on the news, but is currently having trouble breaking below major fibonacci support at the 38.2% fib of 0.3895 - 0.8217 at 0.6565. This will certainly be a move worth watching overnight, as continued declines in the pair would work in favor of broad USD strength.
