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11 Sep 2014
RBNZ: Guidance a dovish surprise - Westpac
FXStreet (Bali) - Imre Speizer, FX Strategist at Westpac, notes that the guidance from the RBNZ today was a dovish surprise to the interest rate markets. The NZD exchange rate was surprised lower.
Key Quotes
"The RBNZ’s Monetary Policy Statement this morning announced the OCR will remain unchanged at 3.50%, unanimously expected. However, the guidance was a dovish surprise to the interest rate markets. The NZD exchange rate was surprised lower."
"The RBNZ’s 90-day interest rate forecast was lowered by 49bp at the two-year ahead point, leaving it only 20bp higher than market pricing. We think the market was expecting a reduction of around 30bp, and has thus pushed the 2yr swap rate 5bp lower in response so far."
"The interest rate forecast implies the next hike will probably be in Q2 2015 (the Governor commented in the press conference it is expected to be in April), with a total of 100bp in increases over the remainder of this tightening cycle (previous the RBNZ project a total of 150bp)."
"The notable update to the economic assessment was the non-appearance of inflation, lessening the need to tighten as much as previously thought.
The NZD exchange rate was again singled out, characterised as “Its current level remains unjustified and unsustainable”, effectively repeating July’s veiled intervention warning. NZD/USD thus fell from 0.8230 to 0.8184 in response. We would expect the decline to persist today and target 0.8120."
Key Quotes
"The RBNZ’s Monetary Policy Statement this morning announced the OCR will remain unchanged at 3.50%, unanimously expected. However, the guidance was a dovish surprise to the interest rate markets. The NZD exchange rate was surprised lower."
"The RBNZ’s 90-day interest rate forecast was lowered by 49bp at the two-year ahead point, leaving it only 20bp higher than market pricing. We think the market was expecting a reduction of around 30bp, and has thus pushed the 2yr swap rate 5bp lower in response so far."
"The interest rate forecast implies the next hike will probably be in Q2 2015 (the Governor commented in the press conference it is expected to be in April), with a total of 100bp in increases over the remainder of this tightening cycle (previous the RBNZ project a total of 150bp)."
"The notable update to the economic assessment was the non-appearance of inflation, lessening the need to tighten as much as previously thought.
The NZD exchange rate was again singled out, characterised as “Its current level remains unjustified and unsustainable”, effectively repeating July’s veiled intervention warning. NZD/USD thus fell from 0.8230 to 0.8184 in response. We would expect the decline to persist today and target 0.8120."