NZD: Guided by the RBNZ Decision this Week - Westpac
Imre Speizer, Research Analyst at Westpac, suggests that the RBNZ OCR Review (Thu) headlines this week.
“We expect an on-hold decision (at 2.25%) but also a clear signal it will cut in June (it’s a full MPS which provides the opportunity to clearly communicate the rationale as well as the outlook). That much is priced in and would elicit little reaction from the markets.
However we see a 30% chance the RBNZ decides not to wait for the next MPS and cuts this week instead. As long as the guidance allows for further easing, the NZD should fall sharply in response. But if the message is that the easing cycle has probably ended, the NZD could perversely rise. Data releases next week include the trade balance (Wed), building permits (Fri), and business confi dence (ANZ, Fri).
Bias: NZD/USD remains in an upward trend which dates from mid-Jan, our upside target for the month ahead being 0.7175 (the Feb 2015 low). The main driver has been a weaker US dollar, but more recently the rise in global risk sentiment and commodity prices have contributed. For the week ahead we are neutral, given a material risk of a surprise (only 35% priced in) rate cut next week.”