Barclays say there is an asymmetric reaction risk in the NZD to the 2y inflation expectation outcome this week (ps. data due Wednesday 14 February 2018)
RBNZ Assistant Governor McDermott hinted last week that the bank has not closed the door to rate cuts and that bank would react if there are significant changes in inflation expectations.
Considering additionally that the acting governor has advocated patience in policy tightening. we see an asymmetric reaction in the NZD to the 2y inflation expectation outcome this week:
- a soft print is likely to drive a comparatively larger fall in the NZD compared with a rally on a positive surprise.
- If global market sentiment continues to deteriorate, the NZD is likely to underperform, given its high-beta characteristics, while the JPY would likely benefit
Entry 78.78
- take-profit: 76.20
- stop loss at 80.08
Barclays add that this trade recommendation is valid from the Wellington open Monday morning to the New York close Friday
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