The New Zealand dollar dipped back below 57 US cents ahead of today’s Reserve Bank policy review, which is widely expected to deliver a half-percentage point rate cut.
The kiwi traded at 56.99 US cents at 7am in Auckland from 57.09 cents, and was at 80.81 Australian cents from 89.90 cents after Australia’s central bank cut its target cash rate a quarter-point to 4.1% on Tuesday, its first reduction since 2020.
New Zealand’s central bank signalled a 50 basis point cut was coming early this year in its previous monetary policy statement, with its last forecast projecting more gradual reductions through the rest of 2025. Since then, the economic recovery has been more sluggish than some had predicted, although recent manufacturing and services gauges showed activity picked up in January.
“Back in November, governor (Adrian) Orr guided the market to a 50 basis point-cut for this meeting and that is exactly what the market has priced,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “A smaller cut would be a complete shock. Focus will be on the rate track projection and guidance on future meetings.”
BNZ’s economics team expects the central bank to broadly keep its gradual pace of easing with the OCR ending the cutting cycle just above 3%.
Meanwhile, markets overnight were mixed as Wall Street returned from a long weekend.
The S&P 500 index was up 0.1% in afternoon trading, while the Nasdaq Composite and Dow Jones Industrial Average were both down 0.1%, with some investors cautious about the frothiness of the market.
Bank of America’s latest survey global fund managers showed cash levels are at 3.5% of assets under management, the lowest ratio since 2010.
Pondering Europe
Across the pond, stocks in Europe were broadly stronger as HSBC rallied on its latest restructuring moves, shedding investment bank staff in Hong Kong, while defence stocks extended their rally on the prospect of increased military spending in the continent.
US and Russian officials met in Saudi Arabia to discuss ways to end the Russia-Ukraine war, and have agreed to hold more talks. The kiwi fell to 54.56 euro cents from 54.97 cents yesterday.
Gold prices have continued to rally amid the ongoing geopolitical instability, with gold futures up 1.7% at US$2,949 an ounce. Goldman Sachs and UBS have both raised their forecasts for the precious metal to climb above US$3,000/oz.
Meanwhile, Bitcoin fell for a third day, down 2% at US$94,096.
Milk prices declined at the latest Global Dairy Trade auction, with the GDT price index down 0.6% and an average selling price of US$4,730 a tonne. Whole milk powder prices slipped 0.2% to US$4,153 a tonne.
The Australian’s DataRoom column reported Fonterra Cooperative Group launched the process to sell its consumer businesses, and is also gauging whether an initial public offering of the units will deliver better value for its farmer-shareholders.
Locally, Statistics New Zealand will release producer prices figures for the December quarter, while Australian wage data is due across the Tasman.
Corporate earnings season continues, with Fletcher Building and Ebos Group due to report on the NZX, while Australian companies scheduled include Goodman Group, James Hardie and Ventia Services. National Australia Bank is also expected to release its first-quarter update.
Reporting by Paul McBeth. Image from Curious News.