FXStreet (Barcelona) – Economists at Deutsche Bank, see another rate cut by the RBNZ in its 23rd July meeting and another 50bp of easing beyond that.
Key Quotes
“In May we concluded that the RBNZ would ease a total of 50bp across its next two policy meetings (in June and July). We now think that the flow of domestic data and external events since we made our call in early May argue in favour of the RBNZ continuing to ease the OCR beyond the 23 July meeting. Specifically we look for another 50bp of easing beyond that, taking the OCR down to 2.5%, barring a further material weakening of the (trade-weighted) exchange rate.”
“There is no doubt that this unexpected drop in output in April and the implied increase in the output gap in the second quarter, together with the Bank of Canada’s rather itchy rate cutting trigger finger, increase the likelihood that the BoC will cut another 25bp at the upcoming policy rate announcement on July 15. However, given that this retreat in output was primarily due to a drop in energy output, the solid back to back gains in full time employment in April and May, the improving outlook for the US and the fact that core inflation is above 2%, we expect that Governor Poloz will not be buying more insurance (reference to the last rate cut) unless there is more evidence of a more broad based slowing in growth over the next few months.”
“Our New Zealand economist has extended the easing cycle he sees from the RBNZ to a cumulative total of 100bp of cuts, up from 50bp previously. This is more than is currently priced by the NZ front-end, so we stay long. We also continue to hold a NZ front-end steepener against an AUD front-end flattener.”
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