Confidence will be key
The RBNZ have recently stated that they are unlikely to use 'unconventional' policy measures and that low rates are sufficient for the time being. The CPI data out on Tuesday this week saw a beat with the q/q/ reading printing at 0.7% vs 0.6% expected and the y/y reading at 1.5% vs 1.4% expected (1.7% prior).
The RBNZ is still waiting to see the impact of their surprise 50bps rate cut and the market is now watching the data for indications as to whether the policies are having an impact or not. The CPI data was stronger than expected bit the NZD sold off as RBNZ deputy Governor Bascand said after the data release that the economy remains vulnerable to external shocks and lower rates may still be needed to achieve targets and it is a reasonable prospect for rates to go lower. The last business confidence reading out of New Zealand on September 30th showed the lowest print since April 2008. The next data print for business confidence comes in on October 31 and data is pretty quiet aside from that, so confidence will be key. Until then, and in the absence of any RBNZ comments, I am expecting NZD to remain pressured and moved around by global trade fears or optimism depending on how US/China phase 1 negotiations go.