More on the NZD - CPI & GDT coming up, Bascand's comments, RBNZ implications
CBA on the NZD for today and tonight:
- NZD/USD will be influenced by tonight's Global Dairy Trade auction and today's Q2 New Zealand inflation outcome.
- We expect New Zealand headline CPI inflation of just 0.1% q/q ... weaker than the RBNZ's 0.3% q/q forecast and consensus estimate of 0.2%
- We anticipate a slight decline in NZD/USD below 0.7300 and a temporary lift in AUD/NZD.
- Yesterday, RBNZ Deputy Governor Geoff Bascand delivered a speech highlighting the large improvement in New Zealand's net foreign liabilities (NFL) since 2009. Bascand pointed out the improvement makes the New Zealand economy less vulnerable to shocks. We agree. Bascand also noted that the improvement in the NFL suggests that "the exchange rate may be more sustainable than previously assumed".
- Bascand's comments indicate to us the RBNZ may soften their commentary on the NZD at the next meeting on 10 August possibly removing the underlying desire for a weaker NZD.
Bolding mine for emphasis - and note Citi made a similar point on Bascand's comments:
- "We think this is a fairly meaningful shift in RBNZ rhetoric on the currency, and like selling AUDNZD here."
(more from Citi here)
New Zealand inflation data due at 2245GMT