NZD/USD Fundamental Analysis October 31, 2014 Forecast

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Updated: Aug 25, 2015, 07:00 UTC

Analysis and Recommendation: The NZD/USD is flat at 0.7800 after the Reserve Bank of New Zealand held rates and policy. The Reserve Bank of New Zealand

NZD/USD Fundamental Analysis October 31, 2014 Forecast

Analysis and Recommendation:

The NZD/USD is flat at 0.7800 after the Reserve Bank of New Zealand held rates and policy. The Reserve Bank of New Zealand (RBNZ) left interest rates on hold at its meeting today following four rate hikes earlier this year. With inflation well contained the bank can afford to take a step back and monitor the effects of tighter policy on economic conditions. The key lending rate in New Zealand remained at 3.5 per cent in October. Rates have increased by 100 basis points since the RBNZ began its tightening phase in March. According to Governor Graham Wheeler, strong growth has reduced unemployment and put pressure on existing productive capacity. Strong construction activity and high net migration have supported the rebound in economic activity and are set to continue for the foreseeable future.

The kiwi dropped about two per cent in just two hours after the Federal Reserve gave a more upbeat than expected assessment of the US economy and New Zealand’s Reserve Bank gave no signal it would need to raise interest rates.

Mr Wheeler kept the official cash rate at 3.5 per cent as expected. “CPI (consumers price index) inflation is currently at a low level despite above-trend growth. However, inflation is expected to increase as the expansion continues,” he said. “A period of assessment remains appropriate before considering further policy adjustment.”

The statement removed the bank’s previous view that “further tightening will be necessary to keep inflation near the two per cent target”, reinforcing analyst forecasts for a later resumption of rate hikes after four increases between March and July.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Today’s economic releases actual vs. forecast:

Cur.	Event	Actual	Forecast	Previous
NZD	Interest Rate Decision	3.50%	3.50%	3.50%
NZD	RBNZ Rate Statement
AUD	HIA New Home Sales	0.0%		3.3%

Upcoming Economic Events that you should be monitoring:

Cur.	Event	Actual	Forecast	Previous
JPY	Household Spending		-4.3%	-4.7%
JPY	National Core CPI (YoY)		3.0%	3.1%
JPY	Tokyo Core CPI (YoY)		2.5%	2.6%
AUD	PPI (YoY) (Q3)			2.3%
AUD	PPI (QoQ) (Q3)			-0.1%
AUD	Private Sector Credit		0.4%	0.4%
JPY	BoJ Press Conference
EUR	German Retail Sales		-1.0%	2.5%
EUR	French Consumer		-0.3%	-0.7%
EUR	Italian CPI (MoM)		-0.2%	-0.4%
EUR	Core CPI (YoY) (Oct)		0.8%	0.8%
EUR	CPI (YoY) (Oct)		0.4%	0.3%
EUR	Unemployment Rate		11.5%	11.5%
USD	Core PCE Price Index			1.5%
CAD	GDP (MoM) (Aug)		0.0%	0.0%
USD	Chicago PMI (Oct)		60.0	60.5
USD	Michigan Consumer		86.4	86.4