A great piece from Westpac in New Zealand laying out probabilities for what the RBNZ will do and how it'll impact the NZ dollar

Westpac's expectation (this in summary) is:

  • We expect the RBNZ to keep the OCR on hold at 1.75% at Thursday's Monetary Policy Statement, and to maintain the previous guidance, which should be market-neutral

The bank ascribe a 70% probability to that outcome and suspect it'll have close to zero impact on the NZD.

Otherwise, see a 20% chance of a

dovish outcome

  • where the RBNZ's assessment of the impact of the May Budget is negative
  • If so, its OCR forecast could be lowered slightly(recall the forecast was lowered by 10bp at the Q2 2019point in the May MPS)
  • should cause NZD/USD to fall 0.5c

Our hawkish scenario (10% chance)

  • has the OCR forecast increased slightly
  • Such an outcome is unexpected and should push NZD/USD 1c higher

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Earlier on the RBNZ, previews: