In response to the RBNZ hawkish turn yesterday and subsequent rate hike calls from major banks.
- RBNZ policy announcement - says level of stimulus to be reduced
- RBNZ policy decision minutes: 'least regrets' decision is reducing some support sooner
- NZD/USD higher after the RBNZ tilts more hawkish than was expected
Rate hike expectations brought forward:
- New Zealand bank ASB now forecasting an August RBNZ cash rate hike
- ANZ shift its forecast for the RBNZ to an August rate hike
- BNZ forecast an August cash rate hike from the RBNZ
- While the market had last month begun to speculate as to the possibility that the OCR could be raised before the end of the year, the news that the Large Scale Asset Purchase programme would be halted next week surprised most RBNZ watchers and consequently led to a surge in the value of the NZD.
- The current strength on the USD, which is being drawn from speculation that various FOMC members have become more concerned about inflation risk, could facilitate a more hawkish element in other central banks.
- Despite the policy change from the RBNZ, NZD/USD is trading over 3% lower relative to the start of last month on the back of board-based USD strength. We look for some modest appreciation back towards NZD/USD 0.73 on a 3-month view.
ING have 0.75 in a 6 month horizon:
- We have pencilled in 0.75 as a year-end NZD/USD target. An earlier than expected hike by the RBNZ makes us more confident that the pair will be able to reach such a level.