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Bank of Japan Governor Kazuo Ueda will hold a monetary policy press conference in ten minutes.According to Irans Nour News, Irans ambassador to the United Nations stated in a letter to the UN Secretary-General that the United Arab Emirates bears responsibility for compensation for "allowing the United States to launch airstrikes against Iran from its territory."1. Reuters poll: The European Central Bank (ECB) is expected to keep interest rates unchanged, with 67 out of 72 economists surveyed predicting it will maintain rates at 2% until the end of 2026. 2. BNP Paribas: The ECB is expected to keep interest rates unchanged, but if the conflict escalates and the energy supply chain is severely damaged, the central bank is highly likely to be forced to restart the rate hike process. 3. Vanguard: The ECB is expected to keep interest rates unchanged, and is expected to remain on hold until the end of the year, but has eliminated its previous downward bias on the policy rate outlook. 4. ABN AMRO: The ECB is expected to keep interest rates unchanged, but in a negative outlook, Eurozone inflation may be significantly higher than the baseline, and the ECB may raise rates starting in April. 5. Citigroup: The ECB is expected to keep interest rates unchanged, with uncertainty providing a reason for remaining on hold, but the possibility of several precautionary rate hikes cannot be ruled out. 6. Goldman Sachs: The ECB is expected to keep interest rates unchanged, but in the event of an extremely unfavorable energy situation, the bank may raise rates by 25 basis points three times consecutively starting in June, or even in April. 7. Ebury Group: The ECB is expected to keep interest rates unchanged. The war makes the next move more likely to be a rate hike than a rate cut. Lagarde is likely to say that "the ECB will not allow a dangerous surge in inflation." 8. TS Lombard: The ECB is expected to keep interest rates unchanged. Although pricing in a rate hike this year was too aggressive, the threshold for a rate hike next year has actually lowered, considering that higher natural gas prices are now the baseline scenario. 9. Danske Bank: The ECB is expected to keep interest rates unchanged, while emphasizing vigilance against upside risks to inflation. Rising energy prices complicate the policy outlook, and policymakers are more inclined to maintain policy flexibility. 10. Berenberg Bank: The ECB is expected to keep interest rates unchanged. Even if the war continues longer, the ECB will not raise rates until the second half of 2027 due to the economic stagnation caused by energy price shocks. 11. Nordeabank: The ECB is expected to keep interest rates unchanged. The March economic forecast may not have fully incorporated the impact of the war, and is expected to show slightly better economic growth and slightly lower inflation. 12. KfW: The ECB is expected to keep interest rates unchanged, as current energy price increases have not lasted long enough to force the central bank to raise rates; the word "vigilance" may become a word frequently used by Lagarde. March 19 - According to information obtained from Iranian sources on March 19 local time, recent attacks by the United States and Israel on Iranian medical institutions have resulted in the deaths of at least 18 medical personnel.March 19 – The Israel Defense Forces (IDF) announced today that it has detected a new round of ballistic missile attacks from Iran, and alarms are expected to sound soon in northern Israel. Earlier, the IDF stated that Iran has launched five attacks on Israel since midnight today, using missiles carrying cluster warheads.

Forecast for the New Zealand Dollar: NZD/USD Positioned Between RBNZ Rate Hikes and Ukraine Tensions

Daniel Rogers

May 09, 2022 10:33

The emotion-related Despite another volatile week for global stock markets, the New Zealand Dollar moved cautiously higher last week. The Dow Jones and Nasdaq Composite fell approximately 1.5% and 1.1%, respectively, on Wall Street. Europe and Asia likewise did not appear to be in a good position. The FTSE 100, DAX 40, and Nikkei 225 all declined by 1.9%, 2.5%, and 2.1%, respectively.

 

What may account for the disparity between the New Zealand dollar and market sentiment? Will this continue during the upcoming week? A possible cause is the decline in hawkish monetary policy expectations for the Federal Reserve. According to the CME FedWatch Tool, the probability of a 50-basis-point raise in March has decreased to approximately 21 percent from nearly 50 percent a week ago. This contributed to the weakening of the US dollar, strengthening the New Zealand dollar.

 

This was likely caused by geopolitical tensions and less aggressive Federal Reserve language. Next week, all eyes will be on a meeting between the United States and Russia. The former continues to feel that the latter is preparing an assault. Be wary if more Fed policymakers mention Ukraine. John Williams, president of the New York Fed, stated that he did not see a "compelling reason" for a significant hike in the prime rate.

 

On February 23rd, the Reserve Bank of New Zealand will make its first interest rate decision of the year. The central bank is anticipated to increase interest rates to 1.00 percent from 0.75 percent before. This year, overnight index swaps are pricing in nearly seven rate hikes, indicating a potentially aggressive tightening cycle. This implies that the central bank has a great deal of responsibility.

 

The inflation and labor market figures for the fourth quarter of New Zealand surprised to the upside, increasing the argument for an aggressive RBNZ. However, the downside risk for the New Zealand dollar could be greater if the central bank fails to live up to such bold hawkish wagers. This could result in a classic case of "buy the rumor, sell the news."

 

On the other hand, a close examination of the chart below reveals that a majors-based New Zealand Dollar index is struggling to track the rise in local 10-year government bond yields. This is an indication of the RBNZ's rising hawkish policy bets. So perhaps the New Zealand Dollar has some ground to make up. Nonetheless, it is difficult to disregard the detrimental influence of deteriorating market mood. In light of this, the forecast for the NZD in the coming week is neutral.

 

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