Currency talk: Market bets against June OCR cut
The market has changed its mind and become pessimistic about the Reserve Bank cutting the official cash rate next month, with pricing for a cut down to just 30%.
This follows the market pricing in a 52% chance last week and an 82% chance the week before that.
NZ Forex head of corporate FX Alex Hill says markets have been second-guessing central bank movements for a while.
“What these movements say is regardless of whether we see a cut or a hold, there will be big volatility around the kiwi dollar.”
Although the market is no longer overwhelmingly pricing in a June cut, Mr Hill says it is likely there will be another cut this year, “it’s just a matter of when.”
Mr Hill says it’s exactly the same story in the US in terms of interest rates; the question is when not if.
The US Federal Reserve will announce whether or not it is hiking rates in June. Mr Hill says it could come in June but what happens with the Brexit will be an important part of the Fed’s decision-making process.