Will RBNZ Do More than Cut Rates?

News of improved credit markets helped support both the AUD USD and NZDUSD. Bullish investors are hoping the thawing of the credit marketswill help support the Aussie and Kiwi.

News of improved credit markets helped support both the AUD USD and NZD USD. Bullish investors are hoping the thawing of the credit markets will help support the Aussie and Kiwi.

Today there were some signs of increased trader appetite for risk. This helped to support the Aussie throughout the day. Gains could be limited however as the Australian economy is still in a deepening recession which may require additional stimulus action by the Reserve Bank of Australia to help pull it out of the mud.

Greater demand for higher yielding, higher risk assets helped to support a higher close for the NZD USD. This rally is likely to be short-lived as the New Zealand economy is still in question. Traders are now beginning to price in a 50 basis point cut in the country’s benchmark rate.

The Reserve Bank of New Zealand is already on record opposing the use of interest rates at current levels. They believe that interest rate changes take too long to work their way through the economy. This is why investors should not only watch for a cut in interest rates by the RBNZ but also quantitative easing or a message-sending intervention.