Andrew Ticehurst, Research Analyst at Nomura, notes that there is broad consensus that the RBNZ governor will announce an unchanged cash rate this week.
Key Quotes
“We expect the policy press release to acknowledge the stronger-thanforecast Q2 GDP result but display some caution given softer survey data and reiterate that the next move in the official cash rate (OCR) could be in either direction.”
“Overall, we give the solid real data and supportive underlying fundamentals – expansionary monetary and fiscal policy, a slightly lower NZD and relatively high terms of trade – more weight than the survey data and continue to pencil in a modest 25bp rate hike in Q4 of 2019.”
“We note, however, that many market participants appear to have taken the dovish guidance from the RBNZ governor at face value; rates markets are implying a small probability of a rate cut and speculative short positions in NZD look substantial. This leaves NZ markets vulnerable to a more positive shift in tone from the RBNZ. In our experience with NZ markets, the door to the exit can be very narrow if everyone chooses to leave the party at the same time.”
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