Analysts at ANZ point out that the NZD is currently tracking lower than the RBNZ’s August MPS TWI assumption on account of a range of factors.
Key Quotes
“Does this mean it’s ‘game over’ for possible OCR cuts? The NZD has fallen more than is justified by a weaker domestic outlook, and is thus providing a buffer that may offset weaker activity, though for a mix of reasons it may not prove as stimulatory as history (and forecasting models) would suggest.”
“On the face of it, relative to the August MPS, a weaker domestic outlook and lower TWI appear to be broadly offsetting for the OCR. But of course, the picture could change quite quickly, as recent global market volatility highlights. And for the OCR outlook, much depends on how the RBNZ is weighing up the balance of risks, and domestic and global risks have clearly increased. As such, we expect to see a continued dovish tone at the November MPS.”
“This week looks set to bring a solid Q3 CPI print of 0.8% q/q, but with transitory factors at play, we expect the RBNZ will largely “look through” it.”