Kiwi's Quiet Descent

Sterling has surely dominated currency markets following the momentous referendum in June, but the New Zealand dollar is descending at increasing pace after a remarkable four consecutive monthly increases against USD. The Kiwi carries the highest interest rate advantage among the top traded 11 currencies (USD, EUR, JPY, GBP, AUD, CAD, CHF, NOK, SEK, DKK) yet posts the worst performance this month after sterling. Remarks from the RBNZ's Assistant Governor John McDermott stating the central banks' “current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range”. McDermott added that Q3 inflation is ''expected to be low”. NZDUSD is at fresh 3-month lows on expectations of further rate cuts from the RBNZ following the remarks. Interestingly, kiwi's declined began ahead of the statements, prompting speculation that either the speech was leaked or that traders anticipated the speech would be dovish as had been the case in the last 3 appearances by RBNZ officials. All 3 NZD trades in the Premium Insights are currently showing a gain.

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