Bank of America Merrill Lynch on the central bank outlook

The RBA meeting is due in less than 30 minutes and AUD/NZD is trading at 1.0750.

Bank of America Merrill Lynch Global Research discusses its expectations for this week's RBZ policy meeting and for next week's RBNZ policy meeting.

"We expect the Reserve Bank of Australia (RBA) to pause the rate cutting cycle when the Board meets this week. To us, there has not been time to assess the easing already undertaken that has appeared to undermine confidence and gained traction in housing markets. Unemployment has fallen and inflation is moving in the right direction. We see another RBA cut to 0.5%, likely in February, to support the growth outlook.

The Reserve Bank of New Zealand (RBNZ) has cut rates by 75bp this year and we expect this to reach 100bp when the RBNZ meets and updates forecasts on 13 November. Easier policy wouldsupport the economy via household incomes and the currency channel. There is more traction for tradables inflation in AU relative to NZ," BofAML notes.

"We maintain an AU and NZ 1y1y rate spread convergence trade. AUD/NZD could reach 1.10 if the RBNZ cuts and global trade concerns dissipate," BofAML adds.

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