RBNZ: Policy pace and July hike – TD Securities

FXStreet Insights Team FXStreet

TD Securities’ Prashant Newnaha expects the Reserve Bank of New Zealand (RBNZ) to raise the Official Cash Rate (OCR) by 25bps to 2.50% at next week’s meeting, keeping policy too accommodative with the cash rate still below neutral. Newnaha anticipates further hikes in September and sees Gross Domestic Product (GDP) and inflation running above RBNZ forecasts, arguing against delaying the start of the tightening cycle.

Hiking now but at measured pace

"TD forecasts the RBNZ to hike the OCR 25bps to 2.50% at next week's meeting, but it could signal patience around how quickly it intends to lift the cash rate towards neutral. This should cap any uptick in yields on hike headlines while initial NZD strength is unlikely to be outsized."

"While we concede recent oil moves may see the RBNZ hike at a slower pace than our forecast(Jul, Sep, Dec and Feb to 3.25%), we stick with our call for a July hike."

"A 25bps hike at the July meeting would still have monetary policy too accommodative. The cash rate is currently around 75-100bps below neutral."

"Taking 50bps of those cuts back over July & Sep is prudent considering markets were debating if the RBNZ had an inflation problem brewing before the US/Iran war."

"Of course the Bank may decide to wait till Sep to begin hiking. However, we struggle to see the catalyst for hiking then when conditions are already loose now and will likely loosen further if it decides to wait another two months to calibrate policy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.