Halister News

(Bloomberg) -- The finely-balanced expectations on RBNZ’s rate decision this Thursday suggest that whatever the central bank decides will surprise the market and move NZD, Bloomberg strategists David Finnerty and Michael Wilson write.

• Market pricing and economist expectations have shifted in the past week in opposite directions
  • OIS pricing for an RBNZ rate cut on June 9 is pared to 30.2% over last 24 hours in wake of RBA decision, down from 40.2% probability
  • Median forecast of economists surveyed by Bloomberg expect RBNZ to leave cash rate at 2.25%, with a cut only in August. A survey published on June 3 showed the economists expected a cut in June and no change for rest of year
• CFTC data shows leveraged funds turned net buyers of NZD in week ended May 31
  • After two prior weeks of net selling, leveraged funds have boosted their net NZD long positions to 10,822 contracts, near year-to-date highs of 12,330
• NZD/USD currently down 0.1% to 0.6969; 50-DMA at 0.6850
  • Pair reached 0.6982 yday, highest since a month ago
• In March, RBNZ cut rates by 25 bps and said further easing might be required because of decline in range of inflation expectations
  • NZ 2Q 2-yr inflation expectations rose to 1.64% in 2Q from 1.63% in 1Q; Brent crude oil rallied from $27.10/bbl to more than $50/bbl so far this year
  • ANZ’s May business confidence inflation expectations remained at 1.4% for the fourth straight month
• RBNZ said in April the exchange rate remains higher than appropriate given New Zealand’s low commodity export prices

• NOTE: Michael Wilson and David Finnerty are FX strategists who write for Bloomberg. The observations they make are their own and are not intended as investment advice.