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Forex News Trading For NZ RBNZ Interest Rate

ByHenry Liu
Published 10/26/2011, 04:08 AM
Updated 07/09/2023, 06:31 AM
NZD/USD
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FTNMX301010
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RBNZ (Reserve Bank of New Zealand) will be releasing its interest rate decision today and it is widely expected that Gov. Bollard will announce that No rate change today…

4:00pm (NY Time) RBNZ Rate Decision Forecast 2.50% Previous 2.50%
ACTION: NZDUSD BUY 2.75%

The Trade Plan
Current forecast from economists surveyed by Bloomberg agree that RBNZ is likely to leave the official rate at 2.5% during this meeting; however, in the unlikely event that Gov. Bollard surprises the market and hike rates to 2.75% or higher, we should see an immediate strong demand in the NZD which is a great opportunity to spike trade BUY NZD/USD.

The Market
Recent rise in NZD versus other major currencies, especially against USD and EUR, has provided rooms for RBNZ to keep rates unchanged for the time being. However, Bollard stated on October 3rd that “…interest rate increases will be more restrained than previous cycles but will raise to control underlying inflation. This is due to changes in funding costs for banks, exceptionally low mortgage durations, risk premia, and general caution by households and businesses, including de-leveraging…” which basically means that there will be no rate hikes anytime soon.  Considering the recent quarterly CPI missing expectation and the impasse in Europe, there are no real expectations for a rate hike.

Additional Thoughts
At 5:00pm market is usually low in liquidity, therefore unless we get a surprise, it´s probably best to stay out…

Pre-News Considerations
There is no pre-news trading for this release, but pending on the accompanied statement, we could see some weakness/strength in the NZD.

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