- ND/USD capped within bearish territories as US dollar bounces back to life.
- RBNZ now in focus, traders look to the central bank’s outlook on coronavirus.
NZD/USD is trading between 0.6469 and 0.6503 as we draw to a close for the US session on a day where the bulls strolled into town, lifting sentiment and US equities higher and US 10-year yields recovered, supporting a bid in the US dollar.
RBNZ on hold
The focus now turns to the Reserve Bank of New Zealand meets on 12 February. This will be the first meeting since November where a steady hand at 1% is expected. There is a 50% chance of a cut to 0.75% by end-2020. By contrast, the Reserve Bank of Australia held its cash rate at 0.75% this week, market pricing extends to 0.45% by end-2020.
The vent will follow yesterday’s unemployment data where the rate ticked down to 4.0% in Q4 from a downwardly revised 4.1% in Q3, suggesting the labour market has been resilient to the growth slowdown in mid-2019. In contrasts the employment growth was soft but wage growth accelerated.
The data massaged the notion that the central bank will be on hold considering how inflation and the labour market seems to be a comfortable position and traders will expect the RBNZ to remains with its patient tone. The coronavirus will surely be a risk which markets will tune into the central bank’s outlook on, likely coming with cautious language about possible risks to the economic outlook.