• NZD/JPY plummets around 150 pips intraday in reaction to the RBNZ’s surprise 25 bps rate cut.
• RBNZ Governor Adrian Orr noted that we are going back into a period of low and stable inflation.
• A positive risk tone undermines the safe-haven JPY, albeit does little to lend support to the cross.

The NZD/JPY cross retreats sharply from a nearly two-week high touched during the Asian session on Wednesday and dives to the 88.00 mark after the Reserve Bank of New Zealand (RBNZ) announced its policy decision. 

The RBNZ board members decided to cut the Official Cash Rate (OCR) for the first time in over 4 years, by 25 basis points (bps) to 5.25%. This surprise move defies economists' expectations and comes almost a year ahead of the central bank's projections. In the accompanying policy statement, the central bank forecasted more cuts over the coming months, citing the recent progress towards meeting the annual inflation target and weak domestic economic growth. This, in turn, is seen weighing heavily on the New Zealand Dollar (NZD) and exerting downward pressure on the NZD/JPY cross. 

In the post-meeting press conference, RBNZ Governor Adrian Orr said that policymakers considered a range of moves and the consensus was for a 25 bps rate cut. Orr added that rates are not back at neutral in the forecast period as projections show that we are going back into a period of low and stable inflation. The comments did little to provide any respite to the NZD bulls, though a positive risk tone undermines the safe-haven Japanese Yen (JPY) and could lend some support to the NZD/JPY cross. That said, the lack of any meaningful buying supports prospects for a further depreciating move.