Thursday morning in New Zealand brings the Reserve Bank of New Zealand decision for August 2018

  • In GMT … Wednesday 8 August at 2100GMT

ASB:

  • Near-term inflation looks to be firmer, but medium-term inflation pressures appear lower, with more negative risks on the horizon. Watch for RBNZ comfort about the near term but caution about the longer-term inflation outlook. Expect the RBNZ to indicate it is clearly on hold, with OCR hikes remaining just as distant.

TD:

  • Once the OCR is left at 1.75% as widely expected, all eyes on the RBNZ's projected OCR path in the Monetary Policy Statement. Some look for a delay in the 10bp increase from Q3 2019 into 2020, but we don't think such a signal is necessary, and look for no change in guidance. Orr so far is a communication wildcard, making the press conference mandatory viewing for NZD investors.

Via Barclays:

  • We … RBNZ (Thursday) to remain on hold this week
  • The antipodean central banks' relative dovishness makes them the odd ones out in G10. While we expect the RBA to raise its policy rate from Q1 19, the central bank's guidance on the timing of the next move has not been clear, and the market is pricing less than 10bp over the next year. The RBNZ is even more ambiguous, stating that the "next move is equally balanced, up or down".
  • As the Fed hikes while the RBA and RBNZ stand pat, AUD and NZD have been among the worst performers in G10 this year, due to antipodean reliance on global savings on one hand and US economic outperformance and higher yields on the other. · Inflation in Australia and New Zealand has been lackluster, partly due to stubbornly low wages, but wage growth may be bottoming out in both economies. In Canada, the bottoming out of wages marked the start of the BoC's normalization process in 2017. · The antipodeans are also externally vulnerable to growth risks in China, due to deleveraging and trade barriers. AUD and NZD have fared poorly during the current phase of CNY weakness, with Australia's economy particularly to the implementation of trade barriers between the US and China.

I have posted up some previews: