The Reserve Bank of New Zealand’s (RBNZ) upcoming meeting, according to Rabobank analysts, will be critical. They believe the central bank will continue to be more hawkish than the rest of the G10. They prefer selling EUR/NZD rallies in order to return to the 1.63 range.
“The sharp rise in the value of the New Zealand dollar against the US dollar today reflects rising RBNZ rate hike expectations. For a long time, the RBNZ has been commonly regarded as one of the most hawkish G10 central banks, following the Norges Bank. However, market expectations have shifted as a result of an overnight data release, and the RBNZ is now largely regarded as being well ahead of the BoC in terms of rate hike probability. Both central banks’ stated guidance suggests that rates would remain unchanged until the second half of 2022, while some analysts are already predicting a rate hike from the RBNZ as early as November this year. In terms of policy advice, the RBNZ policy meeting on July 14 will be significant.”
“Given that both rates and the New Zealand dollar have already risen, monetary conditions have tightened, and we believe the RBNZ has room to dampen some of the exuberance about rate hike possibilities in the coming weeks. Nonetheless, the RBNZ is expected to remain more hawkish than the majority of G10 central banks.”
“We would prefer to buy declines in the NZD vs. the EUR because we expect the USD to continue on the front foot this summer due to the attention on the potential of Fed tapering. On a three-month basis, we see potential for a return to the February low in the EUR/NZD 1.63 level.”/n
