A weaker NZIER business survey out of New Zealand yesterday, has raised the odds of a larger 50 basis point cut by the Reserve Bank of New Zealand at this week’s meeting. The current rate is at 3%.
The survey showed slowing demand, staff cuts, reduced investment, and weaker profit expectations, with headline confidence slipping to 15 percent from 26 percent in June. At the same time, firms reported rising costs and more price increases, pointing to strengthening inflation pressures. This mix of soft growth and stronger inflation highlights the RBNZ’s policy dilemma of supporting recovery without reigniting price pressures.
Economists are divided on the size of the move. Markets are nearly split, with pricing suggesting a 55–45 percent chance of a 50bp cut. Regardless of the immediate decision, many analysts expect the central bank to follow up with another 25bp reduction in November, bringing the OCR closer to 2.5 percent. Meanwhile, some leading retail banks have already trimmed mortgage rates in anticipation, providing early relief to households.
Looking at NZDUSD, the pair has shifted lower, leaving a clear risk and bias-defining zone above the market. On the 4-hour chart, the 100-bar moving average and the 38.2% retracement of the decline from the September high both sit near 0.5850. Just above, the 200-day MA and the 200-bar MA (4-hour) converge around 0.5869. It would take a break above this cluster of resistance to tilt the bias back toward the buyers. Keep that area in mind if the bias from the decision is less dovish.
For now, sellers remain in control, with the pair trading at the lows of the day near 0.5797, testing support at the August 22 low. On September 25, price broke beneath that level, sliding to 0.5753 — the lowest since April 11. A break below that point would expose the next swing area near 0.5678 (see video above).
This article was written by Greg Michalowski at investinglive.com.