We had some data from Japan today: Reuters Tankan, April trade data, March machine orders data. None of it moved the yen too much.

We also had comments from Fed officials, Federal Reserve Bank of Cleveland President Loretta Mester and Federal Reserve Bank of Boston President Susan Collins. Both emphasised that rates would be held restrictive for longer, in line with pretty much everything we’ve been hearing from the Fed.

The main event for the session, though, was the Reserve Bank of New Zealand Monetary Policy Statement, followed an hour later by the Bank’s media conference.

The Statement was read as quite hawkish. While the Official Cash Rate (OCR) was left unchanged at 5.5%, the ‘path’ for rates ahead was raised by the Bank, implying later rate cuts. The peak the Bank projected was 5.61% (up ever so slightly from 5.6%) in September this year. The Statement and Minutes emphasised that policy needs to be remain restrictive until inflation falls further:

  • “Annual consumer price inflation remains above the Committee's 1 to 3 percent target band, and components of domestic services inflation persist. The Committee agreed that monetary policy needs to remain restrictive to ensure inflation returns to target within a reasonable timeframe.”

The Statement and Minutes noted developments pointing to inflation continuing to fall:

  • "the Committee is confident that maintaining the OCR at a restrictive level for a sustained period will return consumer price inflation to within the 1 to 3 percent target range this calendar year."

The Bank signalled it won’t be cutting the OCR until Q3 of 2025.

NZD/USD was marked higher on the Statement, topping out just over 0.6150.

The media conference that followed had Governor Orr not sounding as hawkish as the statement. NZD/USD drifted back down and is circa 0.6120 as I post.

The jump higher for NZD/USD dragged AUD up, not to the same extent. In local Australian news Avian Influenza has been found on a farm, the first case in Australia. It won’t be the last.

Major FX elsewhere was more subdued as traders await the Federal Open Market Committee (FOMC) May meeting minutes later today.

rbnz nzd wrap 22 May 2024 2