Markets await key rate decisions
Kiwibank anticipates the US Federal Reserve will cut rates for the first time in four years next week, though the size of the cut remains uncertain.
“The data is bad, but not terrible,” with markets debating between a 25bps or 50bps cut, said Kiwibank economists Jarrod Kerr, Sabrina Delgado, and Mary Jo Vergara (pictured above, from left to right).
Global rate cuts in progress
While the Fed deliberates, many central banks are already well into their cutting cycles.
The Bank of Canada has delivered three consecutive 25bps cuts, and the European Central Bank (ECB) is expected to resume cuts this week.
“The ECB will likely resume rate cuts after pausing in July,” the Kiwibank economists said, citing weaker-than-expected inflation and growth in the eurozone.
Local data waits for GDP print
Domestically, Kiwibank analysts are watching New Zealand’s high-frequency data and partial indicators ahead of the upcoming Q2 GDP report.
While the Kiwi dollar benefits from a weakening US dollar, the looming GDP print could apply pressure.
“The GDP print is likely to be ugly, which should provide some downside pressure to the Kiwi,” said trader Mieneke Perniskie.
Kiwi dollar reacts to global moves
With global developments shaping the Kiwi dollar, Kiwibank traders are keeping a close eye on the US and European central bank decisions.
“A stronger NZDUSD impacts exporters and tradable inflation,” said Ross Weston, Kiwibank’s head of balance sheet – Treasury.
Read the Kiwibank report in full here.
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