RBNZ Dovish, SNB Still To Come

Forex News and Events:

A bit like the football team AC Milan – star performer in years gone by – NZDUSD took a good old beating last night. Although the RBNZ’s decision to keep rates on hold at 2.5% was widely expected, the statement and subsequent commentary was altogether more dovish, and extinguished at least some of the prior enthusiasm for NZD this year.

The statement repeated comments that the central bank would look at introducing hikes in mid 2010, but said higher funding costs would reduce the extent of further rate rises. Governor Bollard was also on the wires saying that he saw the future normal level of the cash rate as not conducive to the carry trades; which will no doubt dampen expectations in the rest of the year.

The other central bank meeting due this week is the SNB (decision due 13:00 GMT), but in our view, this will be far less interesting – going with last night’s football analogy it’s more of a Burnley vs. Stoke fixture. Polls show analysts are in unanimous agreement that the SNB will maintain their 3 month labor target at 0.25% this month, despite encouraging readings in Q4 GDP (+0.7% QoQ) and outstanding retail sales figures this month (4.4% YoY).

Most attention will instead focus on whether the SNB will discuss their stance on further FX intervention in EURCHF; and whether they mention any sort of preferred target for the pair. In the past, members have kept away from being too specific about their intervention tactics so we concede there is only a slim chance that more information is forthcoming this time around; nevertheless, EURCHF has spent nearly a month locked in an acutely tight range around 1.4620 levels, and at some point the deadlock between CHF bulls and the SNB will have to come to a head – it’s just doubtful that point will be today’s meeting.

Today’s Key Issues (time in GMT):

13:00 CHF SNB interest rate announcement, % Q1 exp: 0.25 prev: 0.25
13:30 USD Initial jobless claims, thous 6-Mar exp: 460 prev: 469
13:30 USD Continuing claims, thous 27-Feb exp: 4500 prev: 4500

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