Petr Krpata, chief EMEA FX and IR strategist at ING, notes that markets rushed to sell the New Zealand dollar yesterday after the RBNZ revealed that it is “scoping a project” to introduce unconventional monetary policy tools.

“Given that the process is “at a very early stage”, we find it unnecessary for now to attach any probability of the RBNZ announcing quantitative easing imminently, in particular before data provides more clarity on the inflation and growth outlook. While the market may have overreacted to the news – and the New Zealand dollar may stay supported today - we still believe this has been a confirmation that more easing lies ahead. In our view, the next -25 basis point adjustment may come as early as August. When adding lingering trade-related uncertainty and the spectre of slowing Chinese demand, NZD/USD may fall towards 0.65 in the coming weeks.”