The New Zealand dollar pulled back sharply at the end of the US session to a nearly 2-year low as the Reserve Bank of New Zealand cut rates more than expected by 50bps to 7.50 percent.
This is the second rate cut in a row by the central bank, as the move was exacerbated by the post-meeting press release issued by RBNZ Governor Alan Bollard. Indeed, Mr. Bollard said that "it is appropriate to move towards a less restrictive monetary policy stance," suggesting that they will continue cutting rates in the future as weakening economic activity is "expected to translate into lower inflation pressures in the medium term." This sentiment has left Credit Suisse overnight index swaps to continue pricing in 150bps worth of cuts by the RBNZ over the next 12 months. The Australian dollar was weighed down by the RBNZ news as well, but the currency faces its own event risk tonight as the Australian unemployment rate is anticipated to pick up to a 9-month high of 4.4 percent. On the other hand, the net employment change is forecasted to rise by 5.9K, and this tends to have a greater impact on the Aussie than the unemployment rate. Indeed, like the US Non-Farm Payrolls release, the figure rarely meets expectations and can lead to volatile short-term price action for the Australian dollar immediately following the news at 21:30 EDT.
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