NZD: Decline in the exchange rate is needed - ANZ

Research Team at ANZ, notes that the NZD pared gains overnight, but that is still effectively the message currency markets have given an RBNZ that says a “decline in the exchange rate is needed”.

Key Quotes

“Governor Wheeler even acknowledged the market’s ‘hunger’ at yesterday’s Finance and Expenditure select committee, noting that “if we cut 50bp, the market would still want more”. And that’s not unique to the Kiwi – last week’s rate cut by the RBA saw the AUD rise as well, with the RBA noting that the AUD poses a “significant source of uncertainty” around the outlook. That’s the challenging reality that both central banks are dealing with. In a world of ultra-stimulatory central bank policies pulling global yields lower, there is almost insurmountable pressure for local policy to fall too, else risk an even stronger currency and weaker tradable inflation.”