The kiwi and the doves


Lee Hong Wei

Singapore Sales Trader

Disappointing inflation data from New Zealand have pushed the country’s central bank to join the global dovish chorus. The latest release came in at 0.1% quarter-on-quarter versus an estimated 0.3% q/q as the kiwi fell by more than a cent versus USD after the print. This translates to a 1.5% year-on-year on an annualised basis, so well short of market expectations. It was also the first miss of the key CPI reading in two quarters. Consequently, the probability of a rate cut soared to more than 50% after the release.

Source Bloomberg : Inflation data

The Reserve Bank of New Zealand is targeting annual CPI inflation between 1% and 3% over the medium term with a focus on keeping future inflation near the 2% mid-point. Weakening business confidence has prompted a majority of economists to forecast rate cuts in 2019. Employment data, which do not ordinarily weigh heavily on NZD, pushed kiwi notably lower on February 7 of this year when a marginal wage growth release lessened the probability of an OCR hike.

The RBNZ started the calendar year with next to no probability of a 2019 cut priced in, with markets forecasting a 15% chance. That figure has since risen to a 76% chance of a cut by Q3’19. This comes as no surprise as many global central banks have shifted to dovish stances of late, and there is no real reason for the RBNZ not to follow suit.

The chart below shows the probability of an RBNZ rate cut at the June meeting, as measured since the start of this year.

Source : Bloomberg – Probability of cut for RBNZ for June meeting

The odds of a rate cut fell slightly last week when RBNZ governor Adrian Orr stated that he isn’t particularly worried about the recent slowdown in New Zealand economic growth in a relative sense; that pulled NZDUSD higher as of last week’s close with the pair supported at the 0.660 level. However, we should recall that Orr also painted a dovish picture at the February RBNZ meeting, when he commented that a cut could be required if growth doesn’t pick up.

At the central bank’s March meeting, the RBNZ also cited the weak global economic outlook, noting that that the course of the next OCR move will be down or – at best – neutral.

From a technical perspective, NZDUSD has stayed in a 200-pip trading range since the start of the year, bounded by the 200-week moving average and the Fibonacci 50% retracement confluence. On the daily chart, we see a rebound after the RSI reading probed oversold territory, but overhead resistance remains key at the 0.6750 level.

Source : Bloomberg – NZD weekly chart

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
3 Church Street, #30-00
Samsung Hub
Singapore 049483

All departments are available 08:30 to 17:30 Monday to Friday.


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.