RBNZ Rate Decision – Forex News Trading Events

There is currently no high probability trade opportunities, however we are remaining poised for any action as a result of BOE Minutes and RBNZ rate decision in the sessions ahead. Prepare for the latter event by watching my trading events outlook here and by reading my analysis.

RBNZ Rate Decision:

Due: 22nd of July 10:00pm BST

Reserve Bank of New Zealand

Frequency: 8 times/yr

Current: 3.25%
Expected: 3.25% – 3.00%

The RBNZ announce their interest rate decision and release an accompanying statement outlining the reasons for their decision. On a quarterly basis they also release a Monetary Policy Statement. Unless there is a surprise change in the overnight rate, most of the market impact will come from the language in the statements. The Rate Statement and the MPS are the primary tools the RBNZ use to communicate with investors about monetary policy. They contain the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision. Most importantly, they discuss the economic outlook and offer clues on the outcome of future decisions.

In June the Reserve Bank of New Zealand lowered its overnight cash rate by 25 basis points to 3.25 percent. Analysts were divided on whether the Bank would act at this meeting due to concerns over the Auckland housing market. However, Governor Wheeler stated that the cut was not expected to affect housing.

Similar to the Reserve Bank of Australia, the RBNZ maintains that the NZD is overvalued and further declines would be justified. The RBNZ also stated that further cuts in the OCR would be data dependent. However with that said, the governor said he was ‘happy’ to see the New Zealand dollar fall and would like to see it decline further.

Expected Market Reaction:
No matter the outcome we should see quite a bit of volatility with this rate announcement with the market pricing in a 25 basis point cut ( some are betting on a 50 basis point cut). Whenever there is the expectation of a rate change we are certain to see some volatility. If rates are cut we will see a strong decline in the NZD, however if rates hold steady we are likely to see a rally since the market is already positioning for a 25 basis point cut.

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