New Zealand: Recession Over?

The Reserve Bank of New Zealand cut interest rates by 150bp this afternoon to 5 percent. This is the largest interest rate cut for the central bank and brings their total easing since July to 325bp.

BollardAlthough the degree of the rate cut was not that big of a surprise, the comments from RBNZ Governor Bollard were very interesting. Even though he said that further rate cuts may be warranted, he also indicated that recession in New Zealand may already be over,. This is the reason why the New Zealand dollar rallied after the large rate cut.

The economy is still expected to contract until June but at least for New Zealand a bottom is near. We can only hope the same for the US. The 30 percent decline in the currency year to date is one of the primary reasons why the New Zealand economy will be able to recover quickly.

The combination of a weak currency and another 100bp of expected rate cuts will help to support the economy.

Think about what a strong dollar does to the US economy.

About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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