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NZD Steady Ahead of RBNZ Monetary Policy Speech

Published March 29, 2019

The Kiwi opens relatively flat today, shrugging off weaker than expected business confidence data released yesterday.

NZ Business Confidence Extends Slide in March

The ANZ business confidence survey released yesterday, resulted in a further fall in March amid fears the economy is slowing. The reports showed a net 38% of respondents expected the economy to deteriorate over the course of the year, compared with -30.9% pessimism level from the previous month. A net 6.3% of those polled expected their own companies to grow in the next 12 months vs 10.5% in February. The NZD initially fell 20 points on the announcement, however managed to claw back losses later in the day.

ANZ and ASB Revise Official Cash Rate Forecasts Lower on Dovish RBNZ

ANZ and ASB have both revised their OCR forecasts following the unexpected dovish tone taken by the RBNZ on Wednesday. Both are now predicting the RBNZ to cut interest rates in August and again in November, where ANZ had previously been forecasting a cut in November and ASB forecasting a hike in 2021. Some economists are predicting a cut as soon as May.

Focus will now shift to the RBNZ Governor Adrian Orr’s speech on Monetary Policy changes this morning at 9am. Followed by the NZIER’s Quarterley Survey of Business Opinion (QSBO) released on 2nd April. The QSBO is considered to be the more comprehensive business survey and used to assess the current state of the economy and forecasting short term economic growth.

US Q4 GDP Revised Down as Economy Loses Steam

The US economy slowed more than forecasted in the fourth quarter in 2018, coming in at 2.2% vs expectations of 2.4% and down from the previous quarter of 2.6%. The economy grew 2.9% for all of 2018, falling short of President Donald Trump’s goal of 3%, however was still the strongest growth seen since 2015. Jobless claims fell lower than expected, indicating a strong labour market. Despite weak GDP, USD strengthened as our central bank joins the doves and on Brexit uncertainty.

British MP’s Fail To Secure Majority Vote On Any Brexit Option

None of the eight proposed Brexit options managed to secure backing in a series of votes in the House of Commons yesterday which were aiming to find a consensus on how to leave the EU, leaving Brexit in further disarray. UK Parliament speaker approves Friday vote on Brexit deal and a debate will likely follow on Monday as lawmakers try to retune a deal. Britain was due to leave the EU on 29th March, however Brussels agreed last week to postpone the divorce deal to 12th April to try to resolve a deal. ECB President Mario Draghi has also been reported telling EU leaders “markets are underpricing the no-deal risk”. The pound suffered further loses as we see the NZDGBP surge 0.9% and currently sitting just shy of .5200.