At 20:00 GMT – the NZD announce the O.C.R. – the Official Cash Rate. This is almost certainly going to be 1.75%. So all ears will be on the accompanying Statement and the Press Conference scheduled for 21:00 GMT.
Recent news of a greater Inflation Rate than that previously forecast has the markets buzzing with anticipation of a future interest rate hike though none is scheduled for this year. The RBNZ therefore may have to sound dovish to dampen down speculation that a rate rise is in the pipeline.
“Hence the RBNZ’s’s communication challenge: despite the improvement in the economic outlook and move in risks around the inflation outlook, the RBNZ may still need to sound very dovish if it wants to send a message to market participants which have completely got ahead of themselves.
With the AUD/NZD hitting support earlier today we issued a LONG trade (16.06 GMT – see Twitter) from 1.0443 with a STOP now at 1.0434 for a minimal 9 pip risk.
Hopefully we will get a dovish Statement and Press Conference and this trade will accelerate north.
09/02/2017 08:18 UPDATE.
Yesterday we were hoping for a dovish edge to the RBNZ Statement well that was delivered in spades.
“The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector,” the bank said in a statement.
“A decline in the exchange rate is needed.”
This had the effect of crushing the NZD and our LONG AUD/NZD shot higher. As we were already LONG GBP/NZD from 1.7298 [here] , this trade also benefited nicely.
LONG GBP/NZD and LONG AUD/NZD are our two trades of the year so if we get a sentiment shift towards the GBP and the markets have factored in all Brexit downside, the GBP/NZD trade could could go a long way.