RBNZ: Market pricing currently implies 92% chance of a cut in November - Westpac

Imre Speizer, Research Analyst at Westpac, notes that yesterday’s RBNZ MPS delivered a reasonably dovish package, but fx markets wanted more.

Key Quotes

“The cut was fully priced, as was the 37bp reduction in the 90-day rates track, while the textual guidance was emphatic (via the use of the word “will”). 2yr swap rates initially rose by 5bp in moderate disappointment but soon retraced that and ended the day unchanged. NZD/USD, on the other hand, maintained much of its reaction during the NZ session, only retracing that night in NY on unrelated (USD strength) factors. The fx market’s expectations were arguably stretched, which suggests the RBNZ would have needed to explicitly signal a 1.5% OCR for a NZD decline

Market pricing currently implies a 92% chance of a cut in November, thanks to the RBNZ’s fairly explicit signal. September is only 24% priced, since it’s an interim meeting and thus unfavoured by the RBNZ for policy shifts.”