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Kiwi Bounces Back | Central Banks Ready To Cut Rates

Published March 3, 2020

The New Zealand Dollar has gained around 1% from yesterday’s opening levels and is higher against most major currencies, amid broad based US Dollar weakness. Global Equity markets have surged overnight on the prospect of major central banks cutting interest rates to soften the economic blow of coronavirus.

Central Banks Ready to Cut Rates

The US Dollar fell to a one month low vs a basket of currencies as the US Fed indicated a willingness to cut interest rates to confront the economic fallout from coronavirus. Reports have suggested there could be a coordinated policy response from G7 finance ministers with the Bank of Japan, and Bank of England also indicating they are prepared to move. Fed Chairman Jerome Powell has said that the US economic fundamentals remain strong, however, the risk from the COVID-19 epidemic is evolving. Powell said that the Central Bank is closely monitoring the coronavirus potential effects to slow economic growth. The market is expecting the Fed to cut rates in March after the US stock market suffered its worst week since the 2008 financial crisis recently.

RBA Meeting Today

Markets are expecting the RBA to cut interest rates by 25 basis-points down to 0.50% this afternoon. There is also an outside chance of a 50 point cut in response to the economic impact of coronavirus. Decision is announced at 4.30pm this afternoon NZ time.

RBNZ Likely To Cut This Month

Several leading commentators are now expecting the RBNZ to follow other Central Banks and cut the OCR later this month. A 50 basis-point cut is being predicted by some economists, with the potential for another 0.25% by May, which could take the OCR down to a record low of just 0.25%. A cut from the RBA this afternoon would increase the likelihood of the RBNZ following suit later in the month.