The shock news of a three-day nationwide lockdown in New Zealand has pushed the NZD to the bottom of the G10 FX daily performance table as the market reassesses the chances of a 25 bps rate hike from the Reserve Bank of New Zealand on Wednesday. However, economists at Rabobank see the pullback in AUD/NZD as a selling opportunity.
See – New Zealand: Fundamental factors set to lift the kiwi – Westpac
To hike or not to hike amid fresh covid lockdown
“Even though many forecasters no longer expect that the RBNZ will hike this week, the market is still positioned for two 25 bps rate hikes on a six-month view. Dependent on the path of the Delta variant, there is clearly scope for this to be reined back further and we would expect a more cautious and balanced tone regarding policy risks to be apparent in the RBNZ statement tomorrow.”
“We continue to look for AUD/NZD to trend lower. However, this assumes that New Zealand retains a firmer handle on containment of the virus.”
“Based on the guidance given by the RBNZ tomorrow we are likely to be pulling back our NZD forecasts.”