NZD rate repricing ...
Updated
On the RBNZ side, the cash rate was cut in early May to support Orr's outlook on employment and inflation with mentions of uncertainty around global economic growth. The initial slide in Yields and NZD (at the time markets were only 35% for a cut) was cooled via RBNZ's view that the move creates a more balanced outlook for rates.
I am not expecting any further movement from the RBNZ this year. A follow-up cut has been left on the table should data weaken further (not expected). I expect an economic pickup later in the year to remove any thoughts of another OCR cut.
For the week ahead we have price drives coming from the Budget, monthly business and consumer sentiment surveys. The New Zealand government have announced the Debt:GDP target will be replaced with a broader target range of 15-25% from 2021. Whilst this will not have any effect on short-term FX pricing, it is worth tracking for any downgrades in growth forecasts after the latest downside surprise. Low mortgage rates and cancellation of the proposed mortgage rates will be enough to keep house price inflation under control.
Rate markets are currently pricing another cut to 1.25% in November (odds in my models are 64%) ... this will have to be re-priced and will open the leg towards 0.70 and beyond if USD long-term highs are in play.
Best of luck those who have been following the recent swings in NZD.
I am not expecting any further movement from the RBNZ this year. A follow-up cut has been left on the table should data weaken further (not expected). I expect an economic pickup later in the year to remove any thoughts of another OCR cut.
For the week ahead we have price drives coming from the Budget, monthly business and consumer sentiment surveys. The New Zealand government have announced the Debt:GDP target will be replaced with a broader target range of 15-25% from 2021. Whilst this will not have any effect on short-term FX pricing, it is worth tracking for any downgrades in growth forecasts after the latest downside surprise. Low mortgage rates and cancellation of the proposed mortgage rates will be enough to keep house price inflation under control.
Rate markets are currently pricing another cut to 1.25% in November (odds in my models are 64%) ... this will have to be re-priced and will open the leg towards 0.70 and beyond if USD long-term highs are in play.
Best of luck those who have been following the recent swings in NZD.
Note
Can keep working longs here ... Note
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