Reserve Bank of New Zealand surprised markets by cutting rates by 25 basis points to 2.25%.
- Further easing may be required
- Inflation is expected to move higher over 2016
- Further NZD depreciation is appropriate
- Sees 2016 Q1 annual inflation at 0.4% vs 1.2% prior
- Sees Q4 2016 annual inflation at 1.1% vs 1.6% prior
- GDP to year-end March 2017 +3.1% vs +2.9% prior
This an outright dovish policy aimed at keeping the Kiwi lower.
Reaction in NZD/USD
- The bird was flying till Friday, but lost steam around 0.6800 on MOnday and dripped on Tuesday.
- A quick fire attempt at 0.6800 once again failed and the spot is now treading water around 0.6670 levels.
Going by the daily chart, bears would need a bearish break below the trend line support at 0.6618.
Thee pair would have to chew through bids placed around the multiple moving average levels before testing 0.6618. (0.6637- 100DMA, 0.6631-200DMA, 0.6610 – 50DMA.
A break below trend line support would expose 0.6545, followed a major support at 0.6428