New Zealand Dollar drops sharply after RBNZ surprised the markets by cutting OCR by -50bps to 1.00%. The central bank noted that both options of cutting by -25bps with easing bias and -50bps were discussed in the meeting. However, consensus was reached that ” larger initial monetary stimulus would best ensure the Committee continues to meet its inflation and employment objectives.”
There was no clear signal in the statement regarding further rate cuts. Though, in the key forecast variables table, OCR could bottom out at 0.9% in second half of 2020 before picking up again in mid-2021. It appears that even if there would be more rate cut ahead, that would only be marginal. As some economists would expect, the next cut, if delivered, would be the last one in the current easing cycle.
NZD/USD drops sharply through 0.6422 low today. The development suggests resumption of whole down trend from 0.7558 (2018 high). Multiple rejections by 55 week EMA confirmed medium term bearishness. Current fall should now target 0.6102 (2015 low) next.
