Before the RBNZ
The NZD started off the week strong against the USD despite the NFP jobs report that came in with over 70K above the expected. All eyes were on the Reserve Bank of New Zealand (RBNZ) and more importantly the Top Boss Graeme Wheeler as to whether the RBNZ would maintain its rates or follow the BOE, RBA, and BOJ which had adjusted their interest rates in the week earlier.
All traders were expecting a rate cut due to;
- The decrease in the oil prices that weren’t enough to push the inflation higher as expected by the RBNZ estimates in June.
- The expectations of the FED rate hike didn’t drag NZD/USD lower but rather strengthened it.
- The RBNZ also tightened its mortgage lending restrictions as a possible indication of rate cut.
Furthermore RBNZ Chieftain Wheeler said in the June RBNZ statement that:
At this stage it seems likely that further policy easing will be required to ensure that future inflation settles near the middle of the target range
After the RBNZ
The RBNZ cut its cash rate by 0.25% to a record low 2.0%.
CHART 1- The RBNZ interest rate since April 1st 2015 to July 1st 2016
Contrary to what experts thought, the NZD/USD shoot up by over 130pips within 30minut…