Powell reaffirms the dovish stance, weakening USD; RBNZ held rate constant and NZD keeps the uptrend against counterparts

• Powell sees the US entering a faster-growing stage
• RBNZ held rate constant and supports NZD
• GBPNZD drops after RBNZ outlook

The fed will likely scale back its bond purchase before considering raising the interest rates, commented by Powell on Wednesday. Policy makers will wait until inflation reaches 2% sustainably and the labor market stably recovers before considering raising the rates. This, however, will not likely happen before 2022, said by Powell. The Fed’s forecast last month shows that rates would be held near zero through 2023. The next FOMC’s meeting will be held on April 27 and 28, and the central bank will enter the blackout period on public comment on this Friday. In the FX market, DXY Index keeps the downward trend, currently at 91.68, -0.02% since opening.

In New Zealand, there was no surprise. The monthly meeting kept the rate at 0.25% record low and RBNZ has added that it was prepared to lower rates even further if needed. The scale of the QE program is unchanged, and the central bank will take “considerable time and patience” to wait until the inflation and employment goals are reached. The overall tone of RBNZ was unmistakably dovish, unchanged from its February statement. On the macro front, the well-respected survey agency NZIER projects that 21Q1 GDP for the country will rise by 2%. In the FX market, USDNZD is trading around 0.714 at press time, up about 0.06%. The dovish stance has been widely expected so the pair remains relatively flat. Most of the gains come from USD’s weakness due to Powell’s talk earlier.

NZD’s relatively strength is also present in GBPNZD, which has been declined heavily over the past week from 1.9666 to 1.9494. NZD is largely risk-favored, so as global market optimism rises, the demand on NZD also rises. GBP has been trying to retake some of the losses over the past week and the pair is currently trading at around 1.9278, up minimally at 0.02%. Lack of key data release in the coming days will likely leave the exchange rate on this pair primarily driven by NZD’s movement. We will see New Zealand’s PMI data from March later this week and services PSI (Performance of Services Index) due next Monday. Next week, however, we will have UK job market data and information on New Zealand inflation as well.