What are markets pricing in for a RBNZ rate cut now?
RBNZ rate cut odds rise after New Zealand Q1 inflation data disappoints
The RBNZ next meets on 8 May and markets are growing in favour of a rate cut by the central bank after NZ Q1 CPI data disappointed earlier today. The reaction was rather stark in the kiwi as NZD/USD fell by 100 pips on the back of the release.
But that owes to the fact that markets are now bringing forward RBNZ rate cut odds from August to May instead. The OIS market is now seeing a 55.6% probability for the central bank to cut rates by 25 bps next month, compared to just the 29.1% probability seen at the start of this week.
The RBNZ has already adopted a dovish bias in recent times but now that the data is also suggestive for the central bank to act, they may just decide to pull the trigger.
Over the next few weeks, we'll get March trade balance data (25 April) and Q1 labour market data (30 April) before we approach the RBNZ May meeting. Should those data points disappoint as well, it'll solidify rate hike expectations and markets should fully price that in before the central bank meets next month.
If that is indeed how things play out, just be wary of the usual 'sell the rumour, buy the fact' play on the rate decision.