Another Reserve Bank of New Zealand meeting has come and gone. The verdict: rates will likely be cut no further. This is according to recent statements made by RBNZ Governor Alan Bollard as the benchmark overnight cash rate was left at a record low.
Stating that economic policy seems stable, along with the current monetary policy, Bollard noted that the central bank will “expect to keep the official cash rate at or below the current level.”
As a result, the recent statements negate indications by the bank in late July that rates may need to move further lower in order to boost adequate economic expansion. The country itself has been on the recovery, although not as paced as its trading partner Australia. However, signs are beginning to surface that economic recovery may well help to back current central bank notions.
Recent economic figures point to a more positive GDP outlook as exports picked up in the quarter as imports fell on consumers seemingly turning their backs on foreign made goods. This turn of events will likely keep the currency supported in recent sessions as traders seem to be taking advantage of the higher yield in an anti-dollar environment.
(Figures taken as of January 2009)
Tonight’s monetary policy outcome is likely to set the stage for further gains in the higher yielding currency pairs as the market now turns its attention to two other central bank announcements. Both the Monetary Policy Committee and the Bank of Canada are schedule to announce rate moves (or the lack thereof) tomorrow.
Although market participants are already able to tell the future with both banks likely to hold rates steady, currency bulls will be targeting on the accompanying statements. In regards to the Loonie, it’s a straightforward expectation that commentary on the recent economic expansion and further rate direction will be eyed. However, Pound bulls will forever be focused on any mention of further quantitative expansion as an increase in asset purchases will further damage the underlying cable currency.
Further directional bias is unlikely to be established as we come towards the end of a shortened trading week. Rounding out the data ahead of the weekend will likely be a very bland University of Michigan Consumer Sentiment report, anticipated to show a slight pickup in positive sentiment.
