New Zealand dollar tumbles broadly today as RBNZ indicated that further policy will be needed, paving the way for another rate cut in August. Swaps data is pricing in 90% of a cut in OCR at the meeting on August 11, from current 2.25% to 2.00%.

The central bank noted that long term inflation expectations are “well-anchored” at 2% but short term inflation expectations remain low. And, the “stronger exchange rate implies that outlook for inflation has weakened since the June Statement”. And, “a decline in the exchange rate is needed”.

NZD/USD drops to as low as 0.6950 so far today and the breach of 0.6970 near term support is taken as a sign of near term reversal.