I posted yesterday on BNZ says the lower NZD may remove an impediment to the RBNZ resuming rate hike cycle

More from BNZ today, commenting on Thursday’s migration data ( New Zealand – July net migration +4540 (+4270 prior))

  • NZ net migration (is) at an historically strong pace
  • July recorded a seasonally adjusted gain of 4540, up from 4270 in June
  • This is a measure the RBNZ is watching closely. It sees it primarily providing additional demand stimulus.

They go on (bolding is mine):

  • Along with strong business confidence and PMI and PSI data, we see it as a reason for the market not to get too carried away with reducing OCR hike expectations
  • Currently the market only prices around a 25% chance of hike by year-end, and around 40 bps by this time next year
  • We believe this pricing is looking quite skinny, particularly as the NZ TWI has now fallen to the RBNZ’s Q4 forecast average

Meanwhile, Westpac says:

  • The RBNZ is on hold for the remainder of 2014. That means global factors should dominate.
  • There are early signs the US dollar index has found a medium term base at 79.0. If so, the NZD/USD high of 0.8836 on 7 July should represent the beginning of a major decline into the low 0.80s.

And on AUD/NZD:

  • The RBNZ is on hold for the remainder of the year, while the market has yet to start pricing in an RBA tightening cycle which should launch in August 2015.
  • The next major target is 1.1200.
  • The upward trend in NZ interest rates remains intact, mainly due to the RBNZ tightening cycle which is now around 40% complete.
  • However some consolidation during the next few months is likely since the RBNZ has signalled a multi-meeting pause.