Cut 25bp, OCR track 10–15bp lower (60% probability).
The bank’s base case as they expect the RBNZ to reflect a lower OCR track. The Performance Services Index
released this week shows this is still in contractionary territory but adds to the slight
improvement of the high frequency activity data seen in addition to PMIs. In this scenario, the bank expects some positive impulse for the
NZD, though that will likely be marginal given that the difference between the adjusted
OCR track and market pricing will be minimal.
Cut 25bp, OCR track more than 20bp lower (25% probability).
This would be a more
dovish scenario relative to current market expectations. The commentary will be worth
watching for the RBNZ’s outlook on risks around Q2’s weaker domestic data, which
could drop by up to -1% on an intra-day basis.
Cut 25bp, OCR track unchanged (15% probability).
This is, in the bank’s view, the least likely outcome, but the NZDUSD could rise by up to 1% on a relatively more hawkish outcome, according to the bank. However, the sustainability of any gains in the NZDUSD would depend on
favourable risk sentiment in subsequent trading sessions.
This article was written by Arno V Venter at investinglive.com.
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