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NZD Steady Ahead of RBNZ Decision

Published February 12, 2020

The Kiwi Dollar opens a touch firmer this morning as local markets await this afternoons RBNZ official cash rate decision. Global risk sentiment appears to have improved slightly with equity markets higher and safe haven currencies all underperforming, with the US Dollar retreating from 4 month highs reached earlier in the week.

Powell Warns of Virus Impact

Also weighing on the greenback was comments earlier this morning from Fed Chairman Jerome Powell who warned of the economic risks to the US economy from coronavirus, but still affirmed the view that the US central bank is unlikely to change interest rates in the near term. Powell said he saw no reason to adjust interest rates, unless new developments cause a “material reassessment” to the current outlook. He added that the Fed was closely monitoring developments related to the coronavirus that could impact the global economy.

All Eyes on RBNZ

Markets are pricing in only a very small chance of any rate cut this afternoon, with the RBNZ expected to keep the OCR unchanged at 1.0%. However the near term risk surrounding coronavirus is adding just a flicker of doubt and while it would be a big surprise to see a rate cut, many are expecting a more bearish statement from the bank, keeping their options open as coronavirus begins to impact economic data in the coming months. Some economists are predicting the virus to wipe around 0.5% off GDP in the March quarter.