Traders all over the world are now focused on the Interest Rate Decision of Reserve Bank of New Zealand. Wednesday at midnight, RBNZ Governor Graeme Wheeler will publish a statement to announce his decision over short term interest rates. The governor consults with senior officials and external financial experts to take global expectations into account.
RBNZ Interest Rate Expectations
The markets are currently stirring with anticipations of a highly volatile night. Economists are expecting Governor Wheeler to cut RBNZ Interest Rate by 25 bps, which would reset the official cash rate to 2.00%. Although the recent reports gave mixed signals about the health of New Zealand’s economy, NZD is still deemed as one of the strongest currencies in the world with a solid potential to become a force to be reckoned with.
While there aren’t any major worries looming on the horizon, RBNZ is known to be adopting a dovish approach as the NZ economy is based mostly on international trade. Following the interest rate announcement, RBNZ will publish Rate Statement and Monetary Policy Statement, which provide insights regarding future actions of the central bank to boost the economy of New Zealand.
New Zealand Dollar has been gaining strength against American Dollar since September 2015. The uptrend helped Kiwi to climb more than 1000 pips in about a year, which was the retracement of the 2600 pips fall between June 2014 and August 2015. Looking at the monthly graphics, NZD/USD has already bounced back the large channel, and the retracement might end with the Interest Rate decision. A steep downtrend channel is formed and the pair might fall once more to test the lower border before establishing a new trend.
NZD/USD has been bouncing back and forth between 0.6961 and 0.7219 since June 8th. The pair failed to breach the upper border of the channel after testing it 3 times, and interest rate cut is looming on the horizon. Keep in mind that the traders enjoy increasing the price to be able to go short from higher levels. We might see NZD/USD climb and slightly breach its current resistance until midnight, when things will turn into pumpkin and the expected scenario will happen. If RBNZ Governor’s decision meets the expectations and cuts the interest rate by 25bps, we might see Kiwi fall from it’s current edge.
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