RBNZ decided to cut interest rates by 25 basis points to 2,5%. In the statement authorities said that policy has to remain accommodative and further cuts are possible if needed. However, they expect to reach inflation target in the current rates settings (possibly calling an end of the easing cycle). During the press conference governor Wheeler said he believes NZD is too strong. In the Monetary Policy Statement, Bank lowered the 2016 and 2017 inflation projections. Market took the day as net hawkish for New Zealand, thus NZD gains about 1,1% vs. USD.
US dollar lost not only versus kiwi today. The DXY index is down by 1,1% losing vs. all G10 currencies. Interestingly NOK is gaining the most, correcting large losses lately even despite the lower oil prices. EURUSD broke once again the 1,10 level, proving that dollar strength should not be seen as an obstacle for a Fed hike next week. GBPUSD rose above 1,5180 proving to be an interesting move ahead of BoE tomorrow. On the other hand JPY may be seen as a safe-heaven trade in the declining equities environment.
In Emerging Markets, ZAR was the biggest loser as president decided to sack the minsiter of finance (who was seeking the narrowing of budget deficit). On the other end of spectrum was BRL which is gaining due to increasing possibility of president Rousseff impeachment.
In Europe, stock markets have recovered from some strong early selling but the majority of indexes remain down on the day. The Dax (-0.76%) and Eurostoxx (-0.61%) exhibited these moves, with the German market closing down at 10592. However the contracts on main stock indices decline further after the closing of the market. DAX December’15 contract is eventually lower by 1,75% on the day. Wall Street is also down for the day in a very tumultous day. S&P 500 lost 0,8%, whereas NASDAQ 1,5%. Oil was seen as a drag here yet again, with the risk-off scenario and lower valuations elsewhere not coming as a help neither.
Although oil inventories declined sharply, the oil is down for the day. It was a very volatile day for the commodity traders. WTI was gaining as much as 4% to eventually end the day with 0,75% decline.