AUD/USD and NZD/USD Fundamental Daily Forecast – RBNZ Policy to Stay the Same, but Forecasts Could Move Kiwi
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The New Zealand Dollar is inching higher early Wednesday shortly after the release of the domestic trade balance report and before the release of the Reserve Bank’s (RBNZ) Monetary Policy Statement, Rate Statement and interest rate decision at 02:00 GMT and a press conference at 03:00 GMT.
At 0:44 GMT, the NZD/USD is trading .7231, up 0.0003 or +0.04%.
Muted Reaction to Downbeat NZ Trade Data
The NZD/USD is inching higher despite a drop in New Zealand’s headline trade balance from $1.7 Billion to $0.73 Billion in April. The internals suggest the imports fell below $4.98 Billion from $5.66 Billion whereas exports eased below $5.69 Billion to $5.37 Billion for the stated month.
Reserve Bank of New Zealand Monetary Policy Announcements
NZD/USD traders are not expecting RBNZ policymakers to make any major announcements. The benchmark rate is expected to remain the same as well as the level of bond purchases.
What could move the market, however, is the central bank’s economic forecasts and statements relating to the inflation pressure inside the country.
Ahead of the multiple announcements, Westpac said, “We expect the RBNZ Monetary Policy Statement will leave policy settings unchanged. The economic outlook has improved on balance, despite a soft patch in growth over the summer period. Inflation is expected to rise well above 2% this year, but the RBNZ has already foreseen this and will regard it as temporary. We expect the April trade balance will print a wider surplus of $390 million, with imports easing after a catch-up in March.
Short-Term Outlook
We believe the RBNZ will maintain its monetary policy settings, and highlight the improving economy, the highly successful vaccination campaign and fresh concerns over the new Indian Covid variant.
The RBNZ will also leave its Official Cash Rate (OCR) unchanged at 0.25% for the seventh straight meeting in May. Also look for RBNZ officials to say that the central bank will maintain the LSAP program at NZ$100 Billion while keeping the Funding-For-Lending program (FLP) in place.
We expect to see a lot of positive comments about the fundamentals with policymakers likely to upgrade their economic assessments, but overall, look for the RBNZ to maintain its dovish tone because like the U.S. Federal Reserve, it’s just too early to start considering loosening policy by tapering bond purchases or raising interest rates.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire