TRADING FOREX: NZDUSD: The RBNZ Gets Serious!

The RBNZ releases the property cooling measures implemented rate reductions and NZD lower

This morning, the reserve Bank of new Zealand (RBNZ) has published a consultation document, indicating it intends to adopt further macroprudential measures the country to mitigate systematic risk to the bank mortgages. In a word, the main points are

1. No more than 5 percent of bank lending to residential property investors throughout New Zealand would be allowed with a greater than 60 per cent LVR (ie a deposit less than 40 percent).

2. No more than 10 percent of loans to homeowners across New Zealand would be allowed with an LVR greater than 80 percent (ie a deposit of less than 20 percent).

3. Loans that are exempt from restrictions of existing LVR, including loans for the construction of new housing, continue to be exempted.

Press release here. Press release
Consultation document here. Consultation

The rules will enter into a rapid six weeks in September 1st.

By doing this, the RBNZ tries to remove one of its major roadblocks wise monetary policy. Ie how to reduce rates in a context of low inflation when the housing market is on fire. With a low print on CPI yesterday and Thursday RBNZ update is expected that there will now be a serious conversation on their part vis-à-vis the level of the NZD and intentions re interest rate cuts . It is difficult to interpret in a different way, then they will say the NZD is too high and we can expect a cut at the August meeting and another later in the year.

Certainly, that is what the street is like thinking NZD 2 year swaps make new lows this morning and the NZD fell 80 points 7030. There is certainly no good news on NZD cards this morning.

Our old friend NZD / CAD weekly. Neckline resistance held in 9530.

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