New Zealand Dollar Drops as RBNZ Unexpectedly Slashes Rates by 150bps to Record Low

The Reserve Bank of New Zealand cut their Overnight Cash Rate more than expected by 150 basis points to 3.50 percent, the lowest since the introduction of the mechanism in 1999. This marks the fifth straight meeting where the RBNZ slashed rates, and brings the cumulative total of cuts to a whopping 475 basis points since August 2008. Prior to the release, the markets had only been anticipating a 100 basis point cut, which is part of the reason why the New Zealand dollar fell sharply upon the announcement. Additional bearish pressures were waged on the currency as RBNZ Governor Bollard said that the market may be "correct' to price in further reductions to the OCR, though they likely won't be as aggressive in size.

Hourly NZD/USD charts show that the pair pulled back from resistance at 0.5375, and additional declines will run into near-term support at 0.5185. However, a break below there and the January 20 low of 0.5166 may go on to target the psychologically important 0.5000 mark.

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