New Zealand Leaves Rates Untouched

In a widely anticipated move, the Reserve Bank of New Zealand decided to leave interest rates at a record low of 1.75% during its latest decision.  However, the one major development that materialized was a sense that the New Zealand dollar was overvalued relative to other global peers.  According to the statement from RBNZ Governor Graeme Wheeler, “the exchange rate remains higher than is sustainable for balanced growth.”

Furthermore, he cited the strength of the currency as one of the predominant factors behind disinflation.  Any weakening in the New Zealand dollar would help raise import prices, acting as a net positive for inflation.  Nevertheless, the outlook remains largely positive despite remarks that “monetary policy will remain accommodative for a considerable period.”  The NZDUSD pair fell after the decision, dipping below 0.7200 as downside momentum accelerates.

With Greece and its bailout partners sitting back at the negotiating table once more as Greece fails to meet conditions set forth for another tranche of aid money, the rhetoric is once again ramping higher.  In keeping with an earlier strategy, Germany has once again denied Greece the option for debt relief in the form of a haircut on outstanding debt.

Despite repeated calls from the International Monetary Fund to make Greek debt more sustainable in an effort to ensure that bailouts can actually be repaid, Germany still refuses to even consider the option.  German Finance Minister Wolfgang Schaeuble remarked that the only way a haircut was possible was if Greece opted to leave the Euro Area in accordance with the rules set forth by the Lisbon Treaty.  With political uncertainty still rising, the Euro is reflecting the growing risks, remaining below 1.0700 and extending losses from earlier in the week.