There is very little expectation that the Royal Bank of New Zealand is going to have a major shift in policy in this evening's decision. However, they had been talking in recent weeks about instituting negative interest rates. This would have an adverse effect on any NZD denominated pair.
However, it is important to note that every COT report out there is showing the market heavily in short position; anywhere between 67% and 73% net short as of this writing. This tends to be a contrarian indicator.
Let's note that it seems many of the economic indicators for the country have come in better than expected (although, still horrible as with the rest of the world). This leads us to believe that traders are generally speculating with the idea that something may happen at this meeting with regard to negative interest rates. However, if the status quo stands and interest rate move expectations continue on hold until middle of 2021, the NZD bears may be disappointed.
We here at PrymFX do not believe this to be the base case. As such, we believe the NZD will rally after this meeting.
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