NZ Dollar Strong Ahead of RBNZ Monetary Policy Decision

The New Zealand dollar was among the strongest currencies today amid the mildly positive market sentiment. The currency waits for tomorrow’s monetary policy decision from the Reserve Bank of New Zealand. No economic reports were released in New Zealand today while yesterday’s data was not bad but not particularly good either.
The RBNZ will announce its decision on monetary policy at 2:00 GMT tomorrow. While the vast majority analysts think that the central bank will leave its key interest rate unchanged at 0.25%, an expansion of the quantitative easing program seems possible. Additionally, market participants will watch for the wording of the accompanying statement, trying to decipher the central bank’s plans for the future. There are plenty of specialists who believe that a cut of interest rates into the negative territory later this year is possible.
As for macroeconomic data, yesterday’s ANZ business confidence showed a jump to -45.6 in May from -66.6 in April. It was a special preliminary release, aimed to provide more up-to-date information about the impact of the COVID-19 pandemic on the New Zealand economy. The report commented on the improvement of confidence:

The preliminary ANZ Business Outlook data for May saw a small bounce across all forward-looking activity indicators, but levels remain extremely low.

It added further:

Unsurprisingly, the backward-looking indicators continue to deteriorate.

The outlook for the future of the nation’s economy was somewhat optimistic but not too much:

As New Zealand emerges from a highly successful lockdown there’s a glimmer of light, but it’s at the end of a very long tunnel. Reducing virus cases to negligible levels sharply reduces a huge downside risk for businesses, but it’s clear that very tough times nonetheless lie ahead. The economic damage wrought by the lockdown is only starting to emerge; Level 2 still isn’t ‘normal’ for many businesses; and the global situation remains dire.

NZD/USD rose from 0.6076 to 0.6099 as of 16:54 GMT today. EUR/NZD was little changed at 1.7787. NZD/JPY was down from 65.40 to 65.00 intraday but has rebounded to 65.49 by now.
If you have any questions, comments, or opinions regarding the New Zealand Dollar, feel free to post them using the commentary form below.

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