NZD/USD stands at risk of extending the decline from the previous month as the Reserve Bank of New Zealand (RBNZ) is widely expected to preserve the record-low cash rate at the last policy meeting for 2017.

With the coalition government under Prime Minister Jacinda Ardern pledging to review and revise the RBNZ’s mandate, acting GovernorGrant Spencer may merely attempt to buy more time especially as Finance Minister Grant Robertson argues ‘monetary policy should play its part in the overall economic goals of our government.’ With that said, the change in leadership may keep the RBNZ on the sidelines until Governor Spencer’s term expires in March as the central bank remains in no rush to normalize monetary policy.

Nevertheless, NZD/USD may face a bullish reaction if the RBNZ unexpected alters the monetary policy outlook and prepares New Zealand households and businesses for a rate-hike in 2018.

Impact that RBNZ interest rate decision has had on NZD/USD during the previous meeting

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

SEP

2017

09/27/2017 20:00:00 GMT

1.75%

1.75%

-18

+16

September 2017 Reserve Bank of New Zealand (RBA) Interest Rate Decision

NZD/USD 10-Minute Chart

The Reserve Bank of New Zealand (RBNZ) stuck to the sidelines in September, and it seems as though acting GovernorGrant Spencer will retain the record-low cash rate throughout the remainder of the year as ‘headline inflation is likely to decline in coming quarters.’ The accompanying policy statement suggests the RBNZ will continue to tame bets for higher borrowing-costs as officials reiterate ‘monetary policy will remain accommodative for a considerable period,’ and the central bank may look to toughen the verbal intervention on the local currency as ‘a lower New Zealand dollar would help to increase tradables inflation and deliver more balanced growth.’