By Rebecca Howard
June 26 (BusinessDesk) - The New Zealand dollar held its gains as weak US data put pressure on the greenback and as
investors await the Reserve Bank's rate decision this afternoon.
The kiwi was trading at 66.44 US cents at 7:50am in Wellington versus 66.47 US cents at 5pm. The trade-weighted index
was at 72.55 from 72.53.
US consumer confidence fell to near a two-year low in June following a downward revision of May data by the Conference
Board. A sub-index measuring the current situation fell to its lowest level in 12 months, while the forward-looking
index was at its lowest level since January. New home sales fell 7.8 percent in May following a 3.7 percent fall in
April, the Commerce Department reported.
A speech by Federal Reserve Chairman Jerome Powell added to the view the Fed may move to cut rates soon. Powell said
there is a backdrop of heightened uncertainties and "the question my colleagues and I are grappling with is whether
these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation."
He also asserted the Federal Reserve's independence in his speech to the Council on Foreign Relations in New York.
"The Fed is insulated from short-term political pressures—what is often referred to as our 'independence.' Congress
chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term
political interests. Central banks in major democracies around the world have similar independence," he said.
The main event for the kiwi today, however, is the Reserve Bank's policy decision at 2pm.
All 20 economists surveyed by Bloomberg expect the official cash rate to stay on hold at 1.50 percent. But the short
statement will be closely scrutinised for any clues on whether the bank is planning to ease further.
"Whilst no change to policy is expected, the RBNZ’s statement will drive the NZD," said ANZ FX/rates strategist Sandeep
NeverthessParekh.
Nevertheless, the market is pricing around a 20 percent chance of a cut today.
"Although GDP and CPI are close to the bank's targets, we cannot rule out the possibility of the bank delivering a
surprise cut at this meeting to show it is ahead of the curve," said Prashant Newnaha, senior Asia-Pacific rates
strategist for TD Securities.
The kiwi was trading at 95.43 Australian cents from 95.50. It was at 52.31 British pence from 52.12, at 58.42 euro cents
from 58.26, at 71.17 yen from 71, and at 4.5691 Chinese yuan from 4.5741.
(BusinessDesk)
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