- The New Zealand dollar proves the maximum of the year at 0.6030, driven by the risk appetite.
- Trump’s pause in 50% tariffs on the EU has increased appetite for risk.
- The US dollar continues to weaken for concerns about the fiscal recklessness of the United States.
The decision of the US president, Trump, to temporarily suspend 50% tariffs on EU products is increasing appetite due to the risk of investors on Monday. This is feeding the New Zealand dollar, risk -sensitive, which has risen to test the maximum of the year at 0.6030.
Trump turned back in his plan to impose 50% tariffs on all EU products, and the market has breathed relieved, fearful that a commercial break between the US and Europe would have a significant impact on global economic growth.
The RBNZ cuts rates on Wednesday is expected
This news He has diverted the attention of the investors of the next monetary policy meeting of the New Zealand Reserve Bank, scheduled for Wednesday. Market consensus anticipates a 25 basic point rate cut at 3.25%.
Beyond that, the bank statement is expected to be tilted towards a dovish tone, suggesting greater monetary relief in the future, before the uncertain global commercial context. The New Zealand Economic Research Institute, considered the Shadow Monetary Policy Board, has confirmed this opinion, with most members recommending a cutting quarter and one advocating a 0.50%cut.
However, the dollar is suffering their own weaknesses, which keep the downward attempts limited. Moody’s reduced the country’s debt qualification last week, at the time when Trump’s broad fiscal bill went through the House of Representatives to be discussed in the US Senate.
Billón
The bill is expected to increase the US debt in approximately 3.8 billion $ in the next ten years, which has generated serious concerns about the fiscal stability of the United States, undermining confidence in the US Treasury bonds and in the US dollar in a trade of “selling America.”
RBNZ FAQS
The New Zealand Reserve Bank (RBNZ) is the Central Bank of the country. Its economic objectives are to achieve and maintain the stability of prices – won when inflation, measured by the consumer price index (CPI), falls within the range of between 1% and 3% – and support the maximum sustainable employment.
The Monetary Policy Committee (MPC) of the New Zealand Reserve Bank (RBNZ) decides the appropriate level of the official cash rate (OCR) according to its objectives. When inflation is above the objective, the bank will try to control it by raising its key, making money borrowing for homes and companies and cooling the economy. The highest interest rates are generally positive for the New Zealand dollar (NZD), since they generate greater returns, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the NZD.
Employment is important for the New Zealand Reserve Bank (RBNZ) because an adjusted labor market can feed inflation. The objective of the “maximum sustainable employment” is defined as the greatest use of labor resources that can be maintained over time without creating an acceleration of inflation. “When employment is at its sustainable maximum level, there will be low and stable inflation. However, if employment is above the sustainable maximum level for too long, it will eventually cause prices to increase more and more quickly, which will require the MPC to increase interest rates to maintain inflation under control,” says the Central Bank.
In extreme situations, the New Zealand Reserve Bank (RBNZ) can implement a monetary policy tool called quantitative flexibility. The QE is the process by which the RBNZ prints local currency and uses it to buy assets (generally government or corporate bonds) of banks and other financial institutions with the objective of increasing the internal money supply and stimulating economic activity. The qe generally results in a neo -Zealand dollar (NZD) weaker. The QE is a last resort when it is unlikely that simply lowering interest rates achieve the objectives of the Central Bank. The RBNZ used it during the Covid-19 Pandemia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
