NZD/USD - A Live RBNZ Meeting Ahead
A live-ish RBNZ meeting is on deck in the very early hours (UK time) of Wednesday morning.
While a handful of local banks, and 2 of the 21 economists in the Bloomberg survey, expect a 25bp hike, the majority see the OCR remaining unchanged at 5.5%. NZD OIS sees around a 3-in-10 chance of a hike at the February meeting, while pricing around 15bp of further tightening this cycle – the only major central bank, ex-Japan, where further hikes are priced.
Personally, I see little reason for the RBNZ to tighten further, as disinflation continues, inflation expectations slip back towards the RBNZ’s target band, and as, worryingly, consumer spending shows signs of rolling over significantly. While the labour market remains tighter than policymakers would desire, and wage pressures intense, it would seem more prudent simply to retain the present level of restriction, rather than hike further, only to likely end up cutting more aggressively than would otherwise be required in Q3/4 24.
In any case, for the NZD, an RBNZ hike this week would likely see the Kiwi pop back towards the cycle highs around the 0.64 figure, while failure to live up to (relatively) hawkish expectations should see downside prevail, and the NZD give up a significant chunk of recent gains, in a decline back below the 50-day moving average.
While a handful of local banks, and 2 of the 21 economists in the Bloomberg survey, expect a 25bp hike, the majority see the OCR remaining unchanged at 5.5%. NZD OIS sees around a 3-in-10 chance of a hike at the February meeting, while pricing around 15bp of further tightening this cycle – the only major central bank, ex-Japan, where further hikes are priced.
Personally, I see little reason for the RBNZ to tighten further, as disinflation continues, inflation expectations slip back towards the RBNZ’s target band, and as, worryingly, consumer spending shows signs of rolling over significantly. While the labour market remains tighter than policymakers would desire, and wage pressures intense, it would seem more prudent simply to retain the present level of restriction, rather than hike further, only to likely end up cutting more aggressively than would otherwise be required in Q3/4 24.
In any case, for the NZD, an RBNZ hike this week would likely see the Kiwi pop back towards the cycle highs around the 0.64 figure, while failure to live up to (relatively) hawkish expectations should see downside prevail, and the NZD give up a significant chunk of recent gains, in a decline back below the 50-day moving average.
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