Can Kiwi Hold its Double Bottom?

Can Kiwi Hold its Double Bottom?

Tomorrow the RBNZ will have its final rate decision meeting for the year, and while no one is expecting any action on the rate front, traders will watching carefully for any change of posture with respect to monetary policy.

Up to now the primary mandate of the RBNZ has been price stability. That means that it generally concentrated on inflation and left growth issues to fiscal policymakers. However, with the election of a new center-left Labor government, the RBNZ may now be tasked with the dual mandate of growth and inflation. This will be the first time that New Zealand monetary authorities will face the public and reveal their reactions to this proposed policy.

On balance that means the RBNZ should generally be more dovish in its outlook stressing the need for more growth, fretting about deflation and suggesting that the bank will follow a neutral path for the foreseeable future. However, recent data has actually been hawkish with both employment and inflation better than forecast. If the central bank bristles at any suggestion of a dual mandate and makes clear that it intends to maintain its independence than the kiwi could actually pop towards the .7000 barrier.

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