Global macro overview for 09/11/2017

The decision to leave the interest rates unchanged was largely expected. The bank also lifted its inflation forecasts to factor in the impact of new government policies and a weaker currency. At the press conference, Acting Reserve Bank Governor Grant Spencer said proposed Government changes would have little effect on the Bank's thinking in current economic conditions. Nevertheless, in he brought forward a potential rate hike to June 2019 from September that year. He added: " "Moving to a dual mandate is unlikely to have an impact on the way we run monetary policy. Currently, inflation was the Bank's primary objective but was not the sole objective". Moreover, Spencer reiterated the mantra the market participants know from the previous meetings already: "monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly". At the end of the meeting, Spencer added, that RBNZ incorporated preliminary estimates of the impact of new government policies in four areas: new government spending; the KiwiBuild programme; tighter visa requirements; and increases in the minimum wage, but the outlook and the impact of this policies remain uncertain.

In conclusion, a dovish tone of the Spencer remarks and the already known RBNZ wait-and-see approach did not bring anything new to the more tightening monetary policy discussion. The New Zealand Dollar has fallen around 2.3% on a trade-weighted index basis since the new government was formed and is around 6.0% below where the bank forecast it would be in the September quarter.

Let's now take a look at the NZD/USD technical picture at the H4 time frame after the news was released. The market is at the key level now as it tests the technical resistance at the level of 0.6970 and the golden trend line resistance. Nevertheless, the key level to the upside is still the gray zone between the levels of 0.7057 - 0.7089. Only a sustained breakout through this zone would change the outlook to more bullish in the short-term.

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