NZD: Markets equally poised for the RBNZ decision – Westpac

By FXStreet FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that markets are divided over the likely outcome of the December RBNZ Monetary Policy Statement this week.

Key Quotes

“Market pricing is attaching roughly equal odds to interest rates remaining unchanged or a 25 basis point cut.”

“While we acknowledge it won’t be a clear cut decision, on balance we think the weak inflation outlook will tip Governor Wheeler into the rate cut camp. Last week’s data has mostly reinforced that view by illustrating the strong headwinds the NZ economy faces from the soggy international environment and soft commodity prices. What’s more, there’s growing evidence one of the key impediments to lower interest rates, the strong Auckland housing market, is rapidly fading.”

“One temptation for the RBNZ may be to rely on an expected Fed rate hike a week later to put downward pressure on the NZ dollar. But such a strategy carries risks. The market reaction to last week’s ECB decision (where the ECB eased but the Euro rose sharply) should serve as a case in point.”

“The exchange rate reaction to a Fed move will depend not only on its decision on interest rates, but also its signals around the future …read more

Source:: FX Street