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