Morgan Stanley on the RBNZ decision at 2100 GMT

The world is definitely looking up since the last RBNZ meeting. Dairy and oil prices are higher, tradable inflation is much higher than the RBNZ's June forecast and near-term concerns about China have eased, reducing market volatility. Two of the scenarios laid out by the RBNZ for when they would cut have not really played out. House prices continue to rise but at a slower pace than late last year. Overall it becomes difficult to trade the NZD at the moment.

Should Wheeler be worried about his credibility to raise inflation back to target then he could cut rates, especially if he wants to surprise markets.

However we will likely end up with a scenario like last meeting where a cut weakens the NZD but without proper guidance on more cuts than the market is pricing, the NZD ends up higher within a few days.

Trading at the bottom end of a channel, NZDUSD has potential upside towards 0.7150 our view.