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RBNZ deviates from RBA – DBS

NZD/USD fell 0.6% after the RBNZ said it expects inflation to return to the 1-3% target range in the second half. The RBNZ is also diverging from the RBA, where markets still see a risk of another rate hike due to persistent inflation, notes Chang Wei Liang, FX and Credit Strategist at DBS.

An RBNZ rate cut in August is increasingly likely

“NZD/USD fell 0.6% after the RBNZ surprised markets by saying it expects inflation to return to the 1-3% target range in the second half, adding that it could ease monetary tightening with inflation easing. Markets are now pricing in a 44% chance of a rate cut in August.”

“The RBNZ is also diverging from the RBA, where markets still see a risk of another rate hike due to persistent inflation. AUD/NZD has jumped towards 1.11, supported by widening short-term rate differentials between AUD and NZD.”

Source: Fx Street

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