The Reserve Bank of New Zealand (RBNZ) is widely expected to lower its interest rate at its 8 October meeting, though the scale of easing remains in debate. Market pricing currently leans toward a 25 basis-point reduction, with a roughly a 55.5% probability of that outcome and 44.5% odds of a larger cut.
Scenario Analysis
- If the RBNZ cuts by 25 bps:
As this is the base case, markets might only see modest downside pressure on NZD/USD. The pair could drift toward 0.5750 and potentially 0.5700 if the Bank signals further easing ahead.
- If the RBNZ cuts by 50 bps:
A larger-than-expected cut could accelerate NZD selling, particularly if accompanied by a dovish tone. In this scenario, NZD/USD could break below 0.5750 support and test 0.5600 in the days following the decision.
- If the RBNZ holds rates steady:
A surprise hold could trigger a short-covering rally, pushing the pair back above 0.5900 and potentially retesting the 0.6000 area as traders reprice the path of policy easing.
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Trading involves risk and may not be suitable for all investors. The information provided in this article is for educational purposes only and does not constitute financial advice. Always conduct thorough research and seek professional advice before making any investment decisions.
