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RBNZ interest rate announcement March 10 21:00GMT
MARKET EXPECTATION
The Reserve Bank of New Zealand will hold its second meeting for the year and is widely expected to keep the overnight cash rate unchanged at 2.5% (the central bank's last move was in April 2009 when it cut rates from 3% to 2.5%) with central bank governor Alan Bollard sticking to the earlier pledge of raising rates sometime in mid-2010, which could either be in the June 10 or July 29 meeting (markets are pricing in a 25 basis-point hike in each of those meetings which would see rates return to 3%).
DOVISH COMMENTS
However, Bollard has been quoted last month as saying that a hike in interest rates in June may turn out to be too soon in terms of timing, given that inflation is still under control and unemployment may not yet have peaked, especially since the jobless rate hit a 10-year high for the fourth quarter of 2009 at 7.3%, up from 6.5% in the previous quarter and more than double the 3.5% rate of Q4 2007.
AUD-NZD DIVERGENCE
The interest rate hike by the RBA earlier this month from 3.75% to 4% puts more of a divergence between the two economies and their currencies (as defined by the AUD/NZD cross rate, which has risen to a 9-year high) even if the Australian central bank has implied that it has the comfort of pausing in its future tightening of monetary policy if necessary. Downside risks to the economic recovery of both countries may emerge due to a weakening of growth in demand from China and any possible escalation of the fiscal debt status of Greece and other European nations, which strengthen the case for the RBNZ to stay its hand in March and April.
UPSIDE SURPRISE
With only the most hopeful of optimists looking for a surprise rate hike this month, such a surprise move will catch markets off guard and send the New Zealand dollar shooting higher versus the greenback, with a pivotal resistance found at 0.7442 ahead of the 2009 high of 0.7635. A more dovish stance taken by Bollard will put pressure on the kiwi with potential for a re-visit of the February low of 0.6808.
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Please visit http://www.imperialfxonline.com or email promotion@imperialfxonline.com and apply for a free trial to access trading recommendations provided to financial institutions and individual investors, as well as market commentaries and other resources for traders.
RBNZ interest rate announcement March 10 21:00GMT
MARKET EXPECTATION
The Reserve Bank of New Zealand will hold its second meeting for the year and is widely expected to keep the overnight cash rate unchanged at 2.5% (the central bank's last move was in April 2009 when it cut rates from 3% to 2.5%) with central bank governor Alan Bollard sticking to the earlier pledge of raising rates sometime in mid-2010, which could either be in the June 10 or July 29 meeting (markets are pricing in a 25 basis-point hike in each of those meetings which would see rates return to 3%).
DOVISH COMMENTS
However, Bollard has been quoted last month as saying that a hike in interest rates in June may turn out to be too soon in terms of timing, given that inflation is still under control and unemployment may not yet have peaked, especially since the jobless rate hit a 10-year high for the fourth quarter of 2009 at 7.3%, up from 6.5% in the previous quarter and more than double the 3.5% rate of Q4 2007.
AUD-NZD DIVERGENCE
The interest rate hike by the RBA earlier this month from 3.75% to 4% puts more of a divergence between the two economies and their currencies (as defined by the AUD/NZD cross rate, which has risen to a 9-year high) even if the Australian central bank has implied that it has the comfort of pausing in its future tightening of monetary policy if necessary. Downside risks to the economic recovery of both countries may emerge due to a weakening of growth in demand from China and any possible escalation of the fiscal debt status of Greece and other European nations, which strengthen the case for the RBNZ to stay its hand in March and April.
UPSIDE SURPRISE
With only the most hopeful of optimists looking for a surprise rate hike this month, such a surprise move will catch markets off guard and send the New Zealand dollar shooting higher versus the greenback, with a pivotal resistance found at 0.7442 ahead of the 2009 high of 0.7635. A more dovish stance taken by Bollard will put pressure on the kiwi with potential for a re-visit of the February low of 0.6808.
Imperialfxonline
For comments and feedback, please email research@imperialfxonline.com