The Reserve Bank’s (RBNZ) Monetary Policy Committee lowered the official cash rate (OCR) to 4.75% from 5.25% on Wednesday in Wellington, as anticipated by 19 of 23 economists in a Bloomberg survey. The remainder expected a quarter-point move. It is the RBNZ’s second straight reduction after it began its easing cycle with a quarter-point cut in August.

“The committee agreed that the economic environment provided scope to further ease the level of monetary policy restrictiveness,” the RBNZ said. Future changes to the OCR will depend on the bank’s “evolving assessment of the economy,” it said.

New Zealand’s economy has stalled, unemployment is rising and house prices are falling as the prolonged period of high borrowing costs curbs demand. Economists say inflation is now slowing rapidly, and some have warned it may undershoot the 2% midpoint of the RBNZ’s 1% to 3% target range. 

“The next move remains conditional on the data as always but there was nothing in today’s commentary to dissuade the market from continuing to price a follow-up 50-basis-point cut in November as the likeliest outcome,” said Sharon Zollner, the chief New Zealand economist at ANZ Bank in Auckland. “That seems entirely fair, and is our forecast.”

The New Zealand dollar fell more than a quarter of a US cent after the decision to buy 61.06 cents at 3.20pm in Wellington. Stocks extended gains to be up 1.6% while bond yields declined, with 10-year government securities falling as much as five basis points to 4.26%. 

Today’s decision was a policy review, which is not accompanied by fresh economic forecasts or a press conference.

Changing stance

The shift to bigger cuts represents another abrupt change of stance for the RBNZ. 

It said in May it wouldn’t start easing policy until the second half of 2025, and after its Aug 14 pivot governor Adrian Orr said the bank intended to move “calmly” and at a “measured pace”.

The RBNZ’s latest forecasts in August showed the annual inflation rate falling to 2.3% in the third quarter from 3.3% in the second. That data is due Oct 16.

“The committee agreed that monthly price indices signal a continued decline in consumer price inflation,” the RBNZ said in its record of meeting. “Business price-setting behavior is now more consistent with the committee’s inflation remit.”

Just 7% of firms expect to hike prices in the final three months of the year, the New Zealand Institute of Economic Research said last week in its quarterly survey.

Gross domestic product declined 0.2% in the three months through June, putting the economy on the brink of its second recession in less than two years. Soft demand is tipped to boost the jobless rate when third-quarter data is published in early November.

“Economic growth is weak, in part because of low productivity growth, but mostly due to weak consumer spending and business investment,” the RBNZ said. “High-frequency indicators point to continued subdued growth in the near term.”

Many central banks have begun cutting rates and the US Federal Reserve kicked off its easing cycle last month with a half-point reduction. The Reserve Bank of Australia is a notable exception, holding its key rate steady at 4.35% due to upside inflation risks.

“The Committee discussed the respective benefits of a 25-basis-point versus a 50 basis-point cut,” the RBNZ said. “They agreed that a 50-basis-point cut at this time is most consistent with the mandate of maintaining low and stable inflation.”

Current short-term market pricing was also consistent with this decision, it added.

A majority of economists polled before today’s decision expected the RBNZ will follow up with a half-point cut at its final meeting of the year on Nov 27. Investors have almost fully priced in another half-point cut, swaps data show.

“The outlook is broadly consistent with the August monetary policy statement,” the RBNZ said. “Members agreed that an OCR of 4.75% is still restrictive and leaves monetary policy well placed to deal with any near-term surprises.”

Source: The edge markets

Boeing said on Oct 8 that it had withdrawn its pay offer to around 33,000 US factory workers and no further negotiations were planned with their union representatives as a financially damaging strike nears its fourth week.

Boeing and the union held their latest round of negotiations with federal mediators on Oct 7 and 8. But talks collapsed and the sides were left locked in an acrimonious stalemate showing no signs of being resolved anytime soon, a person briefed on the talks said.

“Unfortunately, the union did not seriously consider our proposals,” Boeing Commercial Airplanes head Stephanie Pope said in a note to the employees, calling the union’s demands “non-negotiable”.

“Further negotiations do not make sense at this point and our offer has been withdrawn.”

She noted Boeing had been taking steps to preserve cash.

Reuters reported on Oct 8 that the company is examining options to raise billions of dollars through a sale of stock and equity-like securities while the factories producing its best-selling 737 Max as well as 767 and 777 planes are shut.

Boeing, which is on the brink of losing its prized investment grade credit rating, has also introduced temporary furloughs for thousands of salaried employees.

The striking union of its West Coast factory workers is seeking a 40 per cent pay rise over four years and restoration of a defined-benefit pension that was taken away in the contract a decade ago.

More than 90 per cent of workers voted down an offer of a 25 per cent pay rise over four years before going on strike.

Boeing made an improved offer last month that it described as its “best and final”, which would give workers a 30 per cent raise and restore a performance bonus.

But the union said a survey of its members found that was not enough.

Source: Straitstimes

Silver (XAG/USD) struggles to capitalize on the overnight bounce from the vicinity of the $30.00 psychological mark, or a three-week low and trades with a negative bias for the third successive day on Wednesday. The white metal is currently placed just above the mid-$30.00s and seems vulnerable to prolonging its retracement slide from the highest level since December 2012 touched last week.

From a technical perspective, the recent repeated failures to find acceptance above the $32.00 mark constitute the formation of a bearish multiple-tops pattern on the daily chart. Moreover, oscillators on the daily chart have started gaining negative traction and validate the near-term bearish outlook for the XAG/USD. Hence, a subsequent slide below the $30.00 mark, towards testing the next relevant support near the $29.75-$29.60 confluence, looks like a distinct possibility.

The latter comprises the 100-day Simple Moving Average (SMA) and the 50-day SMA, which if broken decisively should pave the way for a further near-term depreciating move. The XAG/USD might then accelerate the fall towards the $29.00 mark and eventually drop to the $28.60-$28.50 support zone. 

On the flip side, any attempted recovery might now confront immediate resistance and remain capped near the $31.00 mark. That said, a sustained move beyond could trigger a short-covering move and lift the XAG/USD to the $31.55 hurdle en route to the $31.75-$31.80 region and the $32.00 mark. This is followed by the $32.25 supply zone, above which the white metal could aim to challenge the multi-year peak and make a fresh attempt to conquer the $33.00 round figure.

Source: FXSTREET

GBP/USD hangs near multi-week low, below 1.3100 as traders await FOMC minutes

The GBP/USD pair struggles to capitalize on the previous day's modest recovery gains and meets with a fresh supply during the Asian session on Wednesday. Spot prices currently trade around the 1.3085-1.3080 area and remain within the striking distance of a nearly four-week low touched on Monday.

The British Pound (GBP) continues with its relative underperformance in the wake of market conviction that the Bank of England (BoE) might be heading towards speeding up its rate-cutting cycle. The bets were lifted by BoE Governor Andrew Bailey's dovish remarks last week, saying that there was a chance that the central bank could become a bit more aggressive in cutting rates if there's further good news on inflation. This, in turn, is seen as a key factor exerting downward pressure on the GBP/USD pair. 

GBP/USD snaps five-day losing streak but gains remain tepid

GBP/USD pulled the plug on a five-day losing streak, closing a scant one-sixth of a percent in the green on Tuesday. Despite Cable bidders successfully snapping the near-term losing streak, the pair remains stubbornly on the low side of the 50-day Exponential Moving Average (EMA).

UK data remains thin in the front half of the trading week, leaving GBP traders to twiddle their thumbs until the Bank of England’s (BoE) Monetary Policy Report Hearings, slated for Thursday. UK Gross Domestic Product (GDP) figures will follow on Friday. 

Source: FXSTREET