RBNZ left the Official Cash Rate unchanged at 1.00% as widely expected. In the accompanying statement, its noted “soft momentum” has continued in 2020″. But “growth is expected to accelerate over the second half of 2020 driven by monetary and fiscal stimulus, and the high terms of trade.” Impact of outbreak of China’s coronavirus will be “of a short duration” only.
The statement is seen as slightly more hawkish than November’s. Employment is seen by RBNZ as “at or slightly above its maximum sustainable level”, somewhat upgraded from “around” the level. Consumer inflation is “close to” the 2% mid-point of target range too. While low interest remain necessary, the overall statement suggests that RBNZ is more likely to be on hold for the rest of the year than not.
NZD/USD rebounds strongly after the release. The development suggest short term bottoming a 0.6378, on bullish convergence condition in 4 hour MACD. Stronger recovery would be seen to 38.2% retracement of 0.6755 to 0.6378 at 0.6522. That would be close to 55 day EMA (now at 0.6528). We’d expect strong resistance from there to limit upside, at least on first attempt. For now, fall from from 0.6755 is expected resume later after consolidation from 0.6378 finishes.
