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12/08/24
129
NZD Higher, Focus On RBNZ
On Monday, the New Zealand dollar started the week by gaining and NZD/USD traded at about 0.6026, up 0.45% for the day in the North American session.
The Reserve Bank of New Zealand’s next meeting will be on Wednesday and the rate decision is expected to be a close one. Inflation is still sticky and in May the RBNZ forecast that it wouldn’t cut rates until 2025.
The economy has however cooled down and will likely drop into the third recession in only two years, adding pressure on the central bank to do a rate cut to provide some relief.
If the Bank elects not to cut rates, it may put a dovish spin on the meeting and say that it discussed cutting rates at the meeting and may do so in Oct. or Nov. Swap markets are bullish on a rate cut and have priced in a 70% probability of a 0.25% rate cut this week.
The Fed will likely cut next month, but the question is by how much. According to the CME’s FedWatch, markets had priced in a 0.25% cut at 90% month ago, but that was before the financial markets melted and the US posted weak numbers. This boosted the chance of a 0.5% cut, which was around a 50/50 split on Friday with a 0.25% cut.
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