The Reserve Bank of New Zealand (RBNZ) may not have delivered a rate hike yesterday, but they did serve up some pretty juicy statements for all to ponder on. Keep yourself in the know by reading this RBNZ rate statement review!
As expected, the RBNZ held rates steady at 2.50% yesterday and served up some pretty hawkish statements on the side. The boys of the central bank declared that given the current state of the economy, the "insurance" cut that they implemented earlier this year, referring to their March 2011 interest rate cut, could be reversed soon.
Just how soon? Well, markets are anticipating a rate hike as early as September 2011, making the RBNZ one of the few major central banks expected to raise interest rates within the year. All in all, studies show that markets are expecting a 1% increase in interest rates over the next 12 months.
And why shouldn't the RBNZ raise rates? Nowadays, everything looks as though it's back to normal in Middle Earth... Err, I mean New Zealand.
With the Christchurch earthquake well behind it, the economy seems to have stabilized as well, recently posting GDP growth of 0.8% in Q2 2011. Not only is this almost triple the expansion economic fortunetellers had predicted (0.3%), but it's also the largest quarterly growth in over a year.
Inflation seems to be singing the same tune when it comes to interest rates... that is, it's been calling for a rate hike, too! CPI jumped 1.0% last quarter, exceeding forecasts which called for a repeat of Q1 2011's 0.8% reading. The surprising surge in CPI took annual inflation to 5.3%... a 21-year high!!!
Businesses are also optimistic about New Zealand's economic outlook. The NBNZ Business Confidence survey has been improving since after the Christchurch earthquake.
It started out at -8.7 in March, followed by 14.2 in April, and then soared to 38.3 in May. In June, the reading went up to 46.5. This month's reading stands at 47.6. Looking at the numbers, it's pretty clear that the trend in business confidence is upwards.
It seems that the combination of the hawkish RBNZ, positive economic conditions in New Zealand, the contagion troubles in Europe, and the debt ceiling deadlock in the U.S. signals more gains for NZD/USD.
A look at the daily chart of NZD/USD will show that it has been on an unstoppable rally, with the pair posting only its first loss in seven days yesterday.
I don't know about you, but to me, both the fundamentals and technicals of NZD/USD clearly scream the words "buy the freaking dip!"