Quick Facts

• Reserve Bank of New Zealand (RBNZ) cuts interest rates by 0.50%
• RBNZ Governor hints at slower pace of rate cuts
• Kiwi dollar holds firm despite rate cut
• NASDAQ 100 and S&P 500 futures reach new record highs
• Gold becomes attractive haven asset
• Canadian inflation data shows slight uptick
• UK inflation report and FOMC meeting minutes expected today

RBNZD Rate Cut Signals Breathe: February 19, 2025 Market Update

Yesterday, the Reserve Bank of New Zealand (RBNZ) took the highly anticipated step of cutting interest rates by 0.50%. While this move was seen as a welcome relief by many in the markets, the Governor’s subsequent comments have sparked a new wave of speculation about the future trajectory of monetary policy in New Zealand.

The Kiwi Dollar Holds Firm

Despite the rate cut, the Kiwi dollar has managed to maintain its value against major currencies. This resilience can be attributed to the Governor’s comments, which have alleviated some of the earlier uncertainty surrounding the country’s economic outlook. With inflation still under control and the economy showing signs of recovery, the RBNZ’s more measured approach has helped to bolster confidence in the New Zealand currency.

NASDAQ 100 and S&P 500 Futures Reach New Record Highs

In stark contrast to the Kiwi dollar’s stabile performance, global equity markets continued their relentless march upwards. Futures contracts for the NASDAQ 100 and S&P 500 indices notched new record highs, as investors piled into the rally fueled by optimism about the global economy. The growing appetite for risk assets has been driven by a combination of factors, including the ongoing expansion of the US labor market and a perceived slowdown in the pace of rate cuts by major central banks.

Gold Looks Bullish

With equities at record highs and interest rates approaching zero, gold has become an increasingly attractive haven for investors seeking to diversify their portfolios. The precious metal has been gaining steam in recent weeks, and yesterday’s rate cut by the RBNZ has only added to the euphoria. As the global economy continues to navigate the uncertainties of post-pandemic recovery, gold’s safe-haven appeal is likely to remain strong.

Canadian Inflation a Shade Higher

Meanwhile, in Canada, inflation data released yesterday showed a slight uptick in the Consumer Price Index (CPI). While this increase was marginal, it serves as a reminder that the Bank of Canada may not be as inclined to cut rates as aggressively as its RBNZ counterpart. As a result, the Canadian dollar may struggle to maintain its current momentum, potentially paving the way for a more pronounced sell-off in the coming days.

Markets Await UK Inflation and FOMC Meeting Minutes

In a sign of things to come, the UK’s inflation report card is set to be delivered today, potentially providing valuable insights into the country’s economic trajectory. Markets will be closely monitoring the data, as well as the European Central Bank’s (ECB) announcements later this week.

In the United States, the Federal Open Market Committee (FOMC) is set to release its meeting minutes later today, offering investors a deeper dive into the thinking behind the recent rate decisions. Amid the ongoing debate about the optimal pace of monetary policy tightening, these minutes are likely to be closely scrutinized for any hints of future rate adjustments.

As we look ahead to today’s major events, including the UK inflation report and FOMC meeting minutes, one thing is clear: the pace of monetary policy decisions is set to remain a crucial driver of market direction in the coming weeks.