NZD

The RBNZ has followed through and crystalized the built-up market expectations by delivering a 50bp interest rate cut at today’s monetary policy review. The move, the second interest rate reduction this cycle, lowers the RBNZ’s Official Cash Rate from 5.25% to 4.75%. The OCR had reached a peak of 5.5% during the RBNZ hiking phase which had put policy settings well into ‘restrictive’ territory. The economic winds of change are blowing hard in NZ. According to the RBNZ inflation is back in the 1-3%pa target band, activity is subdued with business investment and consumption weak, employment conditions have continued to...

The NZD’s revival against the AUD, which washed through from end-July to mid-September on the back of stronger dairy prices (NZ’s major export) at the start of the new season and concerns about China’s property sector, looks to have run its course (chart 1). Fundamentals are swinging back in favour of the AUD, and in line with our long-held view, we think these underlying trends could persist over the medium-term. Externally, policymakers in China have been stepping up to the plate recently to bolster ‘animal spirits’ across spending and investment and boost growth. Various monetary and housing support measures have...