At its September monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) board members decided to keep the Official Cash Rate (OCR) unadjusted at a record low of 0.25% for the fourth month in a row, as widely expected.  

Members agreed a lower OCR would be complementary to its other monetary policy tools, and that it was prepared to lower the OCR to provide additional stimulus if required. Committee endorsed staff advice to continue front-loading purchases under asset purchase programme.

Committee agreed that providing term funding at rates near the OCR via an FLP would lower funding costs, borrowing costs. The committee maintained its view that a package of an FLP and a lower or negative OCR could provide an effective way to deliver additional monetary stimulus.

Outlook for inflation and employment remained subdued. There is substantial uncertainty about the future spread of COVID-19 both domestically and globally, and how economic, health, and social activity will adapt.

Some members noted it is harder to estimate what the maximum sustainable level of employment is under these conditions. Committee reached a consensus to hold the rate, maintain the LSAP programme of max nz$100 bln by June 2022. These were the keynotes of the meeting.

On the other hand, US President is focused on developing a COVID-19 vaccine by the end of 2020 and a “return to normal” in 2021. We’re by no means experts on the science of vaccine development, but the news has been generally positive on that front, raising the odds of a vaccine in the coming months. It is worth noting that, at least based on this press release, additional support for state and local governments and extending unemployment benefits further are not high priorities at this time.

Outside of the pandemic, Trump has vowed to create 10M new jobs in ten months and 1M new small businesses if he is re-elected, though there is no detail on the specific programs his administration would use to support these goals. These updates support the greenback.

NZD/USD 4 Hour Chart:

Support: 0.6603 (S1), 0.6580 (S2), 0.6538 (S3).

Resistance: 0.6668 (R1), 0.6710 (R2), 0.6733 (R3).

Amidst all the catalysts pressuring Kiwi against the dollar, we expect a bearish trend for NZD/USD.