The NZD was pretty quiet last Friday as it just traded side wards within a tight 70-pip range. No economic data from New Zealand was also released, keeping volatility low. Price movement would probably come back in full swing this week as the Reserve Bank of New Zealand is scheduled to release its interest rate decision on Wednesday, 9 pm GMT.
Interest rate decisions usually have a drastic effect on the foreign exchange market. The reason behind this is that investors tend to purchase securities that pay larger interest rates. All things being equal, it�s only logical for people to put their money wherein the yield is greatest. New Zealand�s benchmark interest rates currently stand at 2.50%, which is pretty high compared to how low interest rates are in the western part of the globe. This gives New Zealand�s central bank a lot of room to move with regards to interest rate cuts to ease the recession�s grip on the economy. With all these signs from economic data that the global recession is easing, economists are expecting interest rates to remain unchanged.
Prior to the RBNZ rate statement, the country�s trade balance is due later at 10:45 pm GMT. The 858 million dollar surplus from May is expected to drop to 214 million in June.