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ANZ analysts points out that the RBNZ has surprised the markets with a shift towards an explicit easing bias at its March meeting and the market pricing shifted aggressively, with 50bps of cuts priced in by the end of 2019.

Key Quotes

“Long-end yields have pre-empted a cut but we expect there will be another move lower once the first cut is delivered and markets open up to the possibility of a third. The Fed’s stance will likely cap any further upward moves in the long end, while there may be a brief repricing at the short end of the New Zealand curve following the RBNZ’s May meeting.”

“We believe there is room for the NZD to move lower as the RBNZ is unlikely to cut just once. Buoyant commodity prices, alongside positive market risk sentiment, will provide support, but domestic challenges remain. We expect the NZD/USD to reach 0.64 by the end of this year.”