- Good risk-off opportunity as NZDUSD pullback after larger-than-expected rate cut by RBNZ
- Kiwi to be pressured by trade war
- In contrast to the RBNZ, the Fed was not as dovish as expected
This week we saw the RBNZ delivering a 0.5% rate cut, 0.25% more than what the market had estimated, and said that rates might go into negative territory. The kiwi plunged across the board but still managed to rebound slightly despite such surprise. But with such a shock and dovish message, I think it is hard for this pullback to sustain.
Furthermore, trade tensions are apparently worsening since last week. This will add more downside pressure to risk-on currencies (AUD & NZD).
On the other hand, the Fed delivered a mixed message last week which was not as dovish as anticipated. Until further news is released regarding the Fed's stance on rates, NZDUSD should continue its march downwards to around 0.6380-90.
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