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NZD: Easing expectations building ahead of RBNZ - MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that heightened RBA easing expectations following the weaker CPI report has prompted the market to discount more easing from the RBNZ ahead of their policy meeting.

Key Quotes

“The New Zealand dollar has strengthened over the last month and further easing from the RBA will likely encourage the kiwi to strengthen further. It will increase pressure on the RBNZ to be more active and ease policy further potentially as early as at today’s meeting. At the very least the RBNZ should signal more concern over the recent strengthening of the kiwi.”

“However, rhetoric alone may prove insufficient to prevent a further strengthening of the kiwi in the near-term. The kiwi’s sharp rebound over the last month has already erased the easing impact on overall monetary conditions of the last two rate cuts. If the RBNZ keeps their policy rate unchanged they run the risk of a further unwanted tightening in monetary conditions in New Zealand. Overall we continue to believe that recent kiwi strength is unsustainable and will likely prompt a policy response from the RBNZ.”

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