The commodity dollars dominated once again on Monday as Asian and European equities rallied, indicating broad-based risk appetite. This week, risk trends should remain the primary driver of these currencies, but the New Zealand dollar will face a rate decision on Wednesday, when the Reserve Bank of New Zealand (RBNZ) is anticipated to leave the Official Cash Rate target unchanged for the third straight meeting at 2.50 percent.
In RBNZ Governor Alan Bollard’s last policy statement, he sounded extremely cautious on the outlook for the economy, especially because the strength of the New Zealand dollar had created additional risks. Where the New Zealand dollar ends the trading day will likely have to do with the status of one statement though: the final portion. We also saw in the last policy statement that the RBNZ maintained that it was “appropriate to continue to provide substantial monetary policy stimulus to the economy” and that the central bank could still lower rates “modestly” during the coming quarters as they “continue to expect to keep the OCR at or below the current level through until the latter part of 2010.” If the RBNZ eliminates the phrase noting that they could still lower rates, the New Zealand dollar is likely to surge in anticipation of rate hikes down the line. On the other hand, if the RBNZ maintains their dovish-neutral tone, the currency could slip.
[B]Related Articles: [/B]New Zealand Dollar Weekly Trading Forecast, Australian Dollar Weekly Trading Forecast
[B]View the [/B][B]Daily Fundamentals[/B][B] in its entirety for a look at what happened across the majors.[/B]