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Central banks in the South Pacific are about to announce their rate decisions. How will it move the Aussie and the kiwi?

Here is their view, courtesy of eFXdata:

Bank of America Merrill Lynch Global Research discusses its expectations for this week’s RBZ policy meeting and for next week’s RBNZ policy meeting.

We expect  the  Reserve Bank of Australia (RBA) to pause the rate-cutting  cycle when the  Board meets this week. To us, there  has not been time to assess the easing already undertaken  that  has  appeared to undermine confidence and gained traction in housing markets.  Unemployment  has fallen  and inflation is moving in the right direction.  We see  another RBA cut to 0.5%,  likely in February, to support the growth outlook.

The  Reserve Bank of New Zealand (RBNZ)  has cut rates by 75bp this year and we expect this to reach 100bp when the  RBNZ  meets  and updates forecasts  on 13 November. The easier  policy  would  support the economy via household  incomes  and the currency channel.  There is more traction for tradables inflation in AU relative to NZ,” BofAML notes.  

 “We maintain  an  AU  and  NZ  1y1y rate  spread convergence  trade.  AUD/NZD could reach 1.10 if the RBNZ cuts and global trade concerns dissipate,” BofAML adds.  

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