RBNZ may express comfort on weakness in kiwi, sell NZD/USD?
Risk on the Kiwi could point downwards after RBNZ monetary policy meeting tomorrow. Political uncertainties may slow the pace of RBNZ’s monetary normalisation, even as inflation growth is seen picking up this year.
- Consumer price index rose 1.7% from a year earlier in 2Q this year, vs. 2.2% in 1Q. Both figures are well above the numbers in past five years.
- Political uncertainties could be one of the key reasons behind a possible dovish RBNZ.
- In swap market, most of the market participants expect RBNZ to raise interest rates in November 2018. A few weeks ago, they expected the rate hike to appear in July.
- Kiwi is being weighed down by poor New Zealand business confidence data and policy uncertainty after last Saturday’s election. Moreover, it has to contend with USD strength driven by Trump’s tax progress and an increase in Fed pricing after a speech by Janet Yellen on Tuesday.
- We expect NZD/USD to move lower towards 0.71 after RBNZ meeting tomorrow.
Fullerton Markets Research Team
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