After yesterday’s announcement (23:00 GMT+2) by the RBNZ that interest rate could be lowered in August, the NZD sharply fell in the market. Within an hour the pair NZD/USD fell by 55 points. By the beginning of European session the pair slightly regained; however, it is still under pressure.

Economic forecast presented by the RBNZ showed that long-lasting low rate of inflation and high rate of the national currency, (which adds pressure on dairy and manufacturing industry), hinders development of the economy. Therefore reduction in the interest rate is a compulsory measure. RBNZ Governor Graeme Wheeler said that more monetary easing may be required to ensure the average level of inflation at the middle of the target range".

According to economists, now, after the RBNZ clearly indicated the necessity to reduce interest rate, it can happen at the next meeting of the Bank on August 10. Another reduction of the interest rate will take place later this year. The rate will be reduced from the current level of 2.25% to 1.75% by the end of the year. Prospects of reduction in the interest rate in New Zealand and monetary policy tightening in the United States will be the main drivers of the decline in the pair NZD/USD until the end of the year.

NZD/USD: RBNZ plans to lower interest rate in August. Fundamental analysis for 21.07.2016.

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