RBNZ widely expected to cut rates by 50 bp

New Zealand Dollar: Pressured by expectations of a 50-basis-point rate cut by the RBNZ, with an 87% probability priced in.

By Nadia Elbilassy | @Nadia Elbilassy | 2 October 2024

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  • FTSE China A50: Turned neutral after bearish sentiment since June, boosted by Beijing's stimulus package.

  • Gold Prices: Remained below all-time high after Fed Chair Powell downplayed chances of significant rate cuts this year.

  • Goldman Sachs: Raised 2025 gold price forecast to $2,900/toz, citing falling interest rates and strong EM central bank purchases.

Asian markets

The FTSE China A50 was turned to neutral last week, after a period of predominantly bearish sentiment since June, following Beijing's announcement of a stimulus package, according to Citi.

Both the FTSE China A50 and the Hang Seng Index experienced the largest weekly increase in positioning due to new risk flows.

Kiwi

The New Zealand dollar faced additional pressure due to market expectations of more aggressive easing from the Reserve Bank of New Zealand (RBNZ) at its upcoming meeting, with an 87% probability of a 50-basis-point rate cut being priced in.

Gold

Gold prices continued to hover below its all-time high, following comments from U.S. Federal Reserve Chair Jerome Powell, who downplayed the chances of significant interest rate cuts this year.

Goldman Sachs raised its gold price forecast for early 2025 to $2,900 per troy ounce, up from the previous estimate of $2,700/toz, citing two key factors.

Firstly, they expect a faster decline in short-term interest rates in Western countries and China, noting that the gold market "has yet to fully price in the boost from these rate cuts to Western ETF holdings backed by physical gold, which typically happens gradually."

Secondly, continued strong purchases by emerging market (EM) central banks in the London over the counter (OTC) market are projected to sustain the gold rally that began in 2022.

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