AUD/NZD: Raise the roof – Westpac

By FXStreet Sean Callow, Research Analyst at Westpac, suggests that when the RBNZ cut the overnight cash rate to 2.5% in Dec 2015 but didn’t sound enthusiastic about further easing, Westpac NZ was one of only two banks in the Bloomberg survey (11 Dec) to forecast a 2% OCR by end-2016.

Key Quotes

“A couple of respondents actually forecast higher rates this year! So credit to Dominick Stephens and his team for highlighting the downside risks to growth and inflation that would warrant the RBNZ to take further action.

Admittedly, Westpac didn’t have great confidence in whether the RBNZ would cut rates at the March or June MPS meetings. The deterioration in the global outlook since year-end and the fall in NZ inflation expectations (16 Feb) argued for the RBNZ delivering on its existing easing bias. But it was hard to forget 3 Feb when the NZ Q4 unemployment rate was reported to have tumbled and RBNZ governor Wheeler stressed the importance of focusing on core infl ation, not headline. Hence markets were pricing only about a 1/3 chance of a 25bp cut today.

NZD/USD duly fell more than a cent and AUD/NZD jumped from 1.1070 to around 1.1250, printing highs dating to …read more

Source:: FX Street