New Zealand Dollar Slumps After RBNZ Dovish Statement

The New Zealand dollar slumped today after the Reserve Bank of New Zealand released monetary policy statement that was more dovish than market participants had anticipated.

The RBNZ left its main interest rate at 1.75%. Such decision was widely expected.

While the central bank said that “outlook for the New Zealand economy[…]remains intact,” it outlined plenty of risks. Globally, trade wars was the major risk:

This outlook has been tempered slightly by trade tensions in some major economies. Ongoing volatility in some emerging market economies continues.

Domestically, things were not perfect either:

The recent weaker GDP outturn implies marginally more spare capacity in the economy than we anticipated. The Government’s projected spending impulse is also slightly lower and later than anticipated.

As a result, the RBNZ signaled that an interest rate cut is possible:

We are well positioned to manage change in either direction – up or down – as necessary.

NZD/USD slid to 0.6752 as of 14:54 GMT, trading at the lowest level since May 2016, after opening at 0.6773 and rising to the daily high of 0.6810. EUR/NZD surged from 1.6991 to 1.7149. NZD/JPY declined from 74.88 to 74.50.

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