The Reserve Bank of New Zealand unexpectedly cut their official cash rate by 25 basis points to 2.25% and said further easing may be needed if inflations falls below 2%. The new zealand dollar fell sharply to 0.6640 from 0.6780 (-140 pips) after the RBNZ announcment Wednesday 20:00 GMT. The RBNZ 90-day bill projection shows one more 25 basis point cut is likely.
The RBNZ Governor Graeme Wheeler said the global outlook has deteriorated due to the weaker growth in China and other emerging markets, and slower growth in Europe. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. The RBNZ lowered their two year inflation forecast to 1.63% in the first quarter from 1.85% three months ago.
The new zealand dollar fell fruther to dip to the intraday low of 0.6613 in Asia followed by a good short covering rebound in Europe to the high of 0.6685 ( 72 pips) buoyed by the weaker yen. NZDJPY rose to 75.80 from 74.90 ( 90 pips) The 14-DMA is marginally higher at 0.6670 after the support line at 0.6630. The market focus ahead is the ECB monetary policy announcement today at 12:45 GMT.