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New Zealand’s labour market still looks soft despite the surprise dip in unemployment, casting doubt on whether the RBNZ will need to rush rate hikes in response to the Iran-driven energy shock. But for the Kiwi, local data is playing second fiddle to broader swings in risk sentiment.
NZD/USD continues to drift in a range, but NZD/JPY directional risks look skewed higher heading into the BOJ and Fed policy decisions.
Fresh Wage and inflation signals muddy the RBNZ rate outlook as Kiwi pairs eye 2026 highs.
Yesterday, we highlighted the upcoming BOJ meeting and its possible impact on GBP/JPY (see “Will the BOJ Bring a Trick or a Treat for GBP/JPY?”), but NZD/JPY is also at an interesting technical juncture.
What is a trend? There are countless ways to answer that question, but I’ve always been partial to perhaps the simplest definition: an uptrend is when an asset moves from the lower left to the upper right corner of the chart, and a downtrend is when it moves from the upper left to the lower right corner.
For obvious reasons, the focus in the FX markets is on the dollar this week. Much has been said about it: if Clinton wins, this will happen and if Trump wins that will happen. The truth is, no one knows what will actually happen, though we can have a good idea about what may happen. Now if you are like me, you cannot wait for the elections to be over so that we can actually concentrate on the US economy again and not on politics. If you are like me, you also wouldn’t like to be heavily-exposed to the dollar in the run up to the elections. This is when some FX crosses come handy. One such pair is the NZD/JPY, though it is not entirely immune to US elections, for it is considered to be a risk-sensitive FX pair.
Tonight’s key fundamental event is the Reserve Bank of New Zealand’s policy meeting, scheduled for 22:00 BST or 17:00 ET. The RBNZ is widely expected to trim interest rates 25 basis points to a new record low of 2.0 per cent.
<p>There will be two other major central banks that will also be making decisions on monetary policy in the coming hours: first the Reserve Bank of New Zealand (RBNZ) and then the Bank of Japan (BOJ). Out of these central banks, the BOJ is the more likely candidate to loosen its policy. Speculation was rife at the end of last week that the BOJ may consider offering financial institutions a negative interest rate on some loans. Will this be enough or effective to push down the yen and underpin the Nikkei remains to be seen. Although the RBNZ is unlikely to make any changes to its policy after the surprise rate cut at its last meeting, it could nonetheless provide a bearish outlook on the New Zealand economy and hint at further interest rate cuts down the line. So, there is a possibility that the NZD could weaken. However that being said, the surprise rate cut last time only had a temporary influence on the NZD before the commodity currency surged higher.</p>
<p>As trading winds down ahead of the long Easter holiday weekend, most markets are going into consolidation mode with trading ranges narrowing down. But unlike the Western stock exchanges, the FX markets will remain open on Friday and next Monday. Volumes will most likely be on the thin side, but that doesn’t necessarily mean volatility will be low. In fact, because of the lower expected volumes, the potential moves may well be more pronounced than would normally be the case during news releases and other unexpected announcements. Looking at the economic calendar, only a handful of macro pointers are due for release over the coming trading days however. Chief among them are inflation figures from Japan tonight and the final US fourth quarter GDP estimate tomorrow. Data from these nations will also dominate the calendar on Monday.</p>
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