📈 Fed's first cut since 2020: Time to buy the dip? See Tech-focused stock picksUnlock AI Picks

Morning Bid: Welcome to the cutting club, Kiwis

Published 14/08/2024, 02:33 pm
© Reuters. FILE PHOTO: View of an entrance to the Reserve Bank of New Zealand in Wellington, New Zealand November 10, 2022. REUTERS/Lucy Craymer/File Photo
NZD/USD
-
UK100
-
JP225
-

(Reuters) - A look at the day ahead in European and global markets from Stella Qiu

The Reserve Bank of New Zealand is known for a tendency to surprise, and this time is no different.

On Wednesday, the RBNZ cut interest rates by 25 basis points to 5.25%, surprising the majority of economists polled by Reuters. It was its first policy easing since March 2020 and a year earlier than its own projections.

As recently as May it was seriously warning of more hikes, so the abrupt reversal was a head turner. RBNZ chief Adrian Orr explained in a presser that "when the facts change, so do we".

It is the latest major central bank to ease policy, following policymakers in Europe, Canada and Britain, and could perhaps be a signal for those that are still holding steady in the face of sticky inflation.

Yes, looking at you, the Reserve Bank of Australia who all but ruled out any rate cuts this year.

The RBNZ seems confident inflation in New Zealand, which ran at 3.3% last quarter, will be back in the target band of 1-3% this quarter, and it does not need to wait for the actual Q3 number to act.

In particular, it also projected a cash rate of 4.92% by December, meaning they see room to cut maybe two more times by Christmas. Markets agree, having already fully priced in another easing in October, with some chance of a 50-basis-point move.

The kiwi dollar duly slumped 1%, while key two-year swap rates fell 11 basis points to the lowest since mid-2022.

Elsewhere, most Asian stocks are cheering data showing U.S. producer prices rose less than expected, which stirred hopes that consumer price inflation would be benign later in the day.

European futures point to a higher open ahead of inflation figures from the UK, where the annual core rate is seen slowing even as the headline number ticks up. EUROSTOXX 50 futures rose 0.2% and FTSE futures gained 0.3%.

Adding to the busy news flow in Asia was that Japanese Prime Minister Fumio Kishida would step down in September, ending a three-year term marked by rising prices and marred by political scandals.

The yen strengthened slightly and the benchmark Nikkei gave up gains to be off 0.2%, a modest reaction to political uncertainty.

Key developments that could influence markets on Wednesday:

-- UK inflation data for July

-- U.S. CPI data for July

© Reuters. FILE PHOTO: View of an entrance to the Reserve Bank of New Zealand in Wellington, New Zealand November 10, 2022. REUTERS/Lucy Craymer/File Photo

-- Euro zone GDP, industrial production data

-- Fed Atlanta President Raphael Bostic speaks

(By Stella Qiu; Editing by Jacqueline Wong)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.