Increased interest in the NZD/USD and AUD/USD pairs, and the Reserve Bank of New Zealand’s interest rate cut. Global currency markets have witnessed increased interest in the NZD/USD and AUD/USD pairs, especially after the Reserve Bank of New Zealand’s decision to cut interest rates. The bank cut its cash rate by 25 basis points to 3.5%, marking the fifth cut in this round of monetary easing. This brings the total number of cuts to 200 basis points since the beginning of the year, demonstrating the bank’s desire to deal cautiously with economic pressures.
This move follows a series of previous cuts, where the bank had cut interest rates by 50 basis points each time. Despite expectations that the Reserve Bank of New Zealand might cut rates by another 50 basis points at this meeting, it decided to adopt a cautious stance. This move likely generated cautious optimism, especially considering the ongoing uncertainty surrounding the impact of the US tariffs, which officials have yet to formally implement.
On the other hand, New Zealand businesses continue to expect inflation to remain within target, indicating a stable inflation rate over the medium term. This outlook is consistent with analysis of the latest Reserve Bank of New Zealand report, which shows the economy is performing as expected, despite the potential negative impact of the tariffs.
Global Economic and Trade Impacts on the New Zealand Economy
The current economic environment reflects several downside risks stemming from global trade conditions, particularly with the tariffs imposed by the US administration. The tariffs’ full impact remains unclear, but analysts expect them to significantly affect New Zealand’s economic growth and inflation. In this context, the Reserve Bank of New Zealand remains flexible enough to take further action if necessary.
Impact of Tariffs on the Economy
The Bank will adopt further monetary easing in the coming months, and expectations indicate a further cut in the cash rate by the end of April or May, to 3.25%. However, the global economic situation may push the bank to take bolder decisions, as trade tensions escalate and concerns about the economic impact of tariff policies increase.
The effects of the US tariffs on Chinese goods remain unclear. These tariffs may indirectly impact trade between New Zealand and other countries. While the impact of these tariffs is limited to overall global economic growth, inflation forecasts in New Zealand indicate a potential decline in commodity prices as a result of these policies.
Accordingly, the Reserve Bank of New Zealand must be prepared to respond quickly to global economic developments. Although New Zealand’s economic growth has proceeded as expected, continued global economic pressures will necessitate additional measures, increasing the likelihood of future interest rate cuts.
Tariffs and the Potential Impact on Currency Markets
The Reserve Bank of New Zealand’s interest rate cut has widened the interest rate differential between the New Zealand and Australian central banks. Bloomberg estimates that both banks will continue cutting interest rates in the near future. This move was expected to support the AUD/NZD pair, but the relationship between the Australian dollar and the Chinese yuan significantly impacted the market and pushed the AUD/USD pair lower.
Short-Term Impacts on the AUD/NZD Pair
Since the last Reserve Bank of New Zealand meeting in February, the AUD/NZD pair has been on a steady decline. Support is located above the trend line in December 2022.
Technical Analysis of the AUD/USD and NZD/USD pairs
This decline appears to be nearing its end. If the Chinese yuan continues to weaken, it could negatively impact the value of the Australian and New Zealand dollars, increasing pressure on the AUD/USD and NZD/USD pairs.
However, the short-term outlook appears to point to continued weakness in these pairs due to influential global economic factors. Near-term movement will remain conditioned by monetary policy developments and the impact of tariffs on the global economy.
Following the Reserve Bank of New Zealand’s interest rate decision, there was a slight movement in the value of the Australian and New Zealand dollars. However, the upside potential for these pairs may be limited for now, due to the larger economic factors affecting the market.
On the charts, the AUD/USD and NZD/USD pairs are showing a sharp decline, suggesting a potential downside breakout. Furthermore, technical indicators, such as the 20-day moving average, are acting as resistance. The Reserve Bank of New Zealand’s recent interest rate cut was in line with expectations, but it also demonstrated the bank’s cautious approach to the current economic situation. At the same time, tariffs will continue to impact the global economy, increasing the need to adapt to changing economic conditions. The market is likely to see further movement in the future, as trade tensions escalate and may require further monetary easing from the Reserve Bank of New Zealand.
NZD/USD Technical Analysis:
The NZD/USD pair is mirroring the previous pair, experiencing a decline following the Reserve Bank of New Zealand’s recent decision. The pair is currently trading near strong support levels, but global economic factors continue to play a significant role.
Technically, a major trend line is supporting the price near the 0.6150 and 0.6100 levels. If the pair fails to maintain this support, it will likely fall.
