RBNZ Likely to Maintain 5.5% OCR Amid Inflation Concerns
The RBNZ is expected to maintain the Official Cash Rate (OCR) at 5.5%. This decision aligns with the advice from the New Zealand Institute of Economic Research (NZIER) Monetary Policy Shadow Board, which recommended keeping the OCR unchanged due to persistent inflation concerns. The central bank aims to maintain a restrictive policy stance to achieve its 1-3% inflation target.
49% Chance of September Fed Rate Cut, Inflation at 0.3%
On the other side of the Pacific, the US Federal Reserve is navigating its inflation challenges. April’s inflation was at 0.3%, and there is ongoing speculation about potential rate cuts in 2024. The CME FedWatch Tool indicates a 49.0% likelihood of a 25 basis points rate cut in September, up slightly from 48.6% a week ago.
Key Fed officials have shared varying perspectives. Michelle Bowman highlighted that the inflation decline observed last year was temporary, with no significant progress anticipated in 2024. Conversely, Thomas Barkin noted that while inflation modifies, achieving the 2% target will take longer.
NZD/USD Resistance at 0.7721, Support at 0.7647
The NZD/USD technical strategy remains flat, with the currency pair treading water near its March high. Key support levels are 0.7647, 0.7595, and 0.7517, while resistance levels are 0.7721, 0.7799, and 0.7925. A daily close above the 61.8% Fibonacci expansion at 0.7721 could expose the 76.4% level at 0.7799. Conversely, a reversal below 0.7647-58 would pave the way for a challenge of 0.7595. Current market positioning appears inconclusive, with traders awaiting a clear signal.
NZD Gains 0.4% Against USD, Hits Two-Month High
The New Zealand Dollar (NZD) has shown notable strength, closing the week with a 0.4% gain against the US Dollar (USD) and achieving its highest level in nearly two months. Last week, the NZD was the best-performing currency among the G10 nations, advancing close to 2%. The Australian Dollar (AUD) kept pace with the NZD, resulting in little change in the NZD/AUD pair, which remains at 0.9165. The NZD/EUR also traded to a fresh two-month high near 0.5650.
NZ 10-Year Bond Yields Rise 3bps to 4.73%
New Zealand’s 10-year government bond yields ended 3 basis points higher in the fixed-income market at 4.73%, with the long end of the curve modestly outperforming. The 10-year to 30-year curve retraced from above the 30 basis points cap. Meanwhile, Australian 10-year government bond futures yields have risen by approximately 4 basis points since the local close on Friday, suggesting an upward bias for New Zealand yields as the week begins.
COMMENTS