RBNZ to keep the OCR at 1% – TD Securities

Ned Rumpeltin, European head of FX strategy at TD Securities, expects policymakers to keep the OCR at 1% at tomorrow's RBNZ meeting.

Key Quotes

“After the RBNZ's surprise 50bps rate cut last month, we note Q2 GDP printed in line with the Bank's expectations. At the same time, the NZD TWI now stands more than 4% below its Aug MPS projections. With this in mind, we think the Bank can afford to 'wait' and 'watch' developments - at least for now. That said, we think the Bank's 2020 midyear GDP forecasts for ~3%/yr growth appear ambitious. And with the global outlook remaining cloudy, the RBNZ is likely to reaffirm downside risks to its forecasts.”

“Accordingly we retain our call for the RBNZ to cut the cash rate to 0.75% in Nov. Against this backdrop, our base case sees NZD remaining on the defensive generally. We note, however, the daily RSI for AUDNZD has started to trend lower after reaching "overbought" levels earlier this month. This could limit upside potential unless Orr delivers another significant dovish surprise this week. Heading into the decision, last Friday's intraday high (1.0840) is the key pivot to the topside ahead of significant resistance in the 1.0875/1.0900 zone. Looking lower, a break below 1.0730 could target a move toward 1.0630.”