NZD/USD Expected to Remain Bearish, Despite the Rate Hikes Coming From the RBNZ
The NZD is expected to turn lower despite rate hikes coming up.
Everyone is expecting the Reserve Bank of New Zealand to increase interest rates in this week’s meeting. The Reserve Bank of Asustralia did the same about a month ago but it didn’t help the Ausie much. The same is expected for the Kiwi now, not much upside is expected after the rate hike, except what’s coming from the USD weakness. Below are expectations from some of the big players in the industry:
Bank of America Global Research discusses its expectations for this week’s RBZN policy meeting.
“The RBNZ should deliver a 25bp hike this week (in line with market expectations) to address price and financial stability concerns. However, the NZ rates market expects additional policy tightening to be front-loaded over the next 12months and for policy settings to move close to neutral,” BofA notes.
“Risk is now skewed towards the RBNZ disappointing hawkish market expectations due to slower growth and tighter financial conditions, which could lead to some front-end outperformance relative to AUD rates and avert pressure for AUDNZD to threaten an unwelcome move through parity,” BofA adds.
MUFG Research has a similar take.
“The RBNZ is scheduled to meet this week when it is expected to finally begin tightening monetary policy by raising rates. According to Bloomberg, 20 out of 21 economists surveyed expect the RBNZ to hike rates by 0.25 point this week to 0.50%. The extension of the COVID lockdowns in New Zealand over the week end is not expected to derail the RBNZ’s plans again to begin hiking rates,” MUFG notes.
“The New Zealand rate market is already pricing in at least one more hike by the end of this year with the policy rate rising towards 1.00% over the next 6 months. It highlights that RBNZ tightening is already well anticipated limiting further support for a stronger kiwi from higher New Zealand rates. Risks appear more skewed to the downside in the near-term given building risks posed by the global slowdown,” MUFG adds.
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