NZD interest rate cut further next week? 16-Jul-2015

Canadian dollar
 Yesterday, Bank of Canada unexpectedly cut 25bp at the interest rate which is now 0.50%. This is because of uncertainty in such energy sector or export of manufacturing goods, according to the source. CAD has been weaken against other currencies. GBPCAD was around 1.9995 before the rate changing and it is 2.022 now.

Financial Post >> David Rosenberg: Why the Bank of Canada cut now


New Zealand Dollar
 On the other side, Reserve Bank of New Zealand (RBNZ) plans the rate decision 23-Jul in next week. NZD has been weak against other major currencies such as GBP and USD since beginning of this year. The interest rate has been expected to be cut this year, as it was mentioned on this blog last Jan.
If the rate is cut next week, NZD will be likely weaker even though the market will have already expected the rate cut. Actually, the inflation rate is lower than RBNZ targeted, and it implies the interest rate is expected to be cut further. GBPNZD is at around 2.393 now, the highest level for almost 6 years.

Scoop >> Keep the interest rate cuts coming - 16 July
Today’s inflation release by Statistics New Zealand showed a Consumer Price Index (CPI) increase of 0.3% annually and 0.4% on last quarter; inflation continues to come in at well below the Reserve Bank of New Zealand’s (RBNZ) target band of 1% to 3% over the medium term – more cuts are justified and helpful to counteract headwinds in our economy, says the New Zealand Manufacturers and Exporters Association.
NZMEA Chief Executive Dieter Adam says, “Inflation remains low and the June CPI would have been flat on last quarter if not for petrol prices. This is further reason for the RBNZ to keep cutting interest rates over this year, to spur growth and help the New Zealand dollar continue its downward trend, improving the competitiveness of our manufacturers and exporters. The continued fall of the currency will also help our dairy sector and the related manufacturers, who are facing hard times with the reduction in dairy prices.


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