NZD/USD is consolidating yesterday’s positive factors round 0.6050. RBNZ Chief Economist Paul Conway maintained a dovish tone, BBH FX analysts report.
Scope for additional OCR cuts
“Conway warned that ‘World tariffs and financial uncertainty are more likely to imply much less inflation pressures in New Zealand and a pullback in enterprise funding and family spending.’ Importantly, Conway reaffirmed the financial institution’s view that it ‘sees scope to decrease the OCR additional if medium-term inflation pressures proceed to ease as projected’.”
“In our view, the RBNZ has yet one more lower within the pipeline. New Zealand inflation is inside the goal band and the coverage charge is near the RBNZ mid-point estimate of the impartial vary between 2% and 4%. The swaps market price-in 86% likelihood of a 25bps RBNZ charge lower on the August 20 assembly.”
“Over the subsequent 12 months, the swaps market price-in 40bps of easing and the coverage charge to backside between 2.75% and three.00%. Backside line: there’s room for New Zealand charge expectations to regulate greater in favor of NZD.”
