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March 2016

New Zealand Dollar tumbles

Published: Thursday 10 March 2016

  • New Zealand Dollar tumbles
  • Key European Central Bank meeting today
  • US Jobless numbers
Last night the New Zealand Dollar fell sharply as Reserve Bank of New Zealand surprised markets by announcing a 25 basis points (0.25%) interest rate cut. Markets had originally expected the central bank to hold and cut later in June.
The RBNZ noted in their statement that "Outlook for global growth has deteriorated since the December Monetary Policy Statement due to weaker growth in China, new emerging markets, and slower growth in Europe." It highlighted the downside risk to the outlook due to China and global financial markets. Domestic risks included the dairy sector, declining inflation expectation and pressures in housing markets. Also, the central bank noted that "there has been a material decline in its range of inflation expectations measures". RBNZ also maintained easing bias and noted that "further policy easing may be required to ensure that future average inflation settles near the middle of the target range."
The European Central Bank rate decision and press conference is the main focus today. The central bank is widely expected to launch extra stimulus measures. (Germany has also released disappointing trade numbers this morning). The deposit rate could be lowered deeper into negative territory by at least -0.1% to -0.4%. The size of the asset purchase program could also be raised by EUR 10b to EUR 70b per month. Meanwhile, the ECB president Mario Draghi disappointed last December with smaller than expected stimulus. Given that the expectation of further stimulus is high for this ECB meeting.
Data released overnight saw China’s Consumer Prices Index rise to 2.3% year on year in February versus an expectation of 1.8%. Their Producer Prices Index rose to -4.9% year on year. Australia’s consumer inflation expectation also rose by 3.4% in March. This afternoon the United States will publish jobless claims numbers, followed by a budget statement this evening and Canada will release their new housing price index.
A guy is helping his grandma to get online.  He sits get in front of the computer and shows her how to open a browser and says, “That’s Google.  You can ask it anything you want and it will access billions of bits of information across the world to get you the answer." 
"That's amazing dear.  I can ask it anything?" 
The grandson nods and smiles.  "Yup.  Anything."
She leans forward until her nose is almost touching the screen and, in a loud voice says, "How are Doris’s ankles this morning?”

Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Manufacturing production m/m -0.3 0.7
CAD 15:00 CAD: Overnight rate 0.50 0.50
USD 15:30 US: Cruide oil inventories 10.4 3.0
NZD 20:00 NZ: Official cash rate 2.50 2.50

FX Research and Daily Currency Analysis with Chris Verdet

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