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NZD Spikes Higher as RBNZ Issues Hawkish Statement

Published February 13, 2020

The Kiwi Dollar begins the day over 1% higher, holding on to gains made yesterday afternoon after the RBNZ announced no change to the Official Cash Rate of 1.0%. Global market sentiment has continued to improve as China reported the lowest number of new coronavirus cases since late January. Commodity prices are generally firmer and global equity prices reached new highs. Commodity based currencies such as the AUD and CAD have both performed well overnight.

RBNZ Surprises Markets With Hawkish Statement

While yesterdays no change decision from the RBNZ was expected, it was the accompanying statement that gave the NZD a boost. The Bank has moved to a neutral policy bias shown by steady OCR projections for the next year and removed previous language about adding more monetary stimulus if required. Current RBNZ projections are for rates to stay at 1% until Q1 2021 and then the possibility of a rise in the June 2021 quarter. The bank of course referenced coronavirus, but was confident any negative impact to the NZ economy would be short term and temporary.

Euro Slides on Weak Data

Eurozone industrial output fell 2.1% from last month, its biggest contraction since 2016. The fall was driven by a massive drop in capital goods output and is in line with a similarly poor reading out of Germany last week. The euro is down against most of the majors (except the yen), but the losses against the US dollar are muted as overall positive market sentiment is weighing on the greenback. The weaker EUR and stronger NZD has seen the NZD/EUR cross rate gain 1.4% from yesterday.

The Day Ahead

A bit quieter than yesterday with RBNZ Governor Orr speaking to Parliament’s finance and expenditure committee this morning. Overseas, the next major data release is tonight’s US CPI number for January.

Rees Logan, Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (NZ) Limited on 30 March 2020. Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (Australia) Pty Ltd on 30 March 2020. Any queries regarding the Administrations should be directed to