The RBNZ diverges from the RBA – DBS

NZD/USD
declined
0.6%
after
the
RBNZ
stating
that
it
expects
inflation
to
return
to
the
1-3%
target
range
in
2H.
The
RBNZ
is
also
diverging
from
the
RBA,
where
markets
still
see
a
risk
of
another
rate
hike
due
to
stubborn
inflation,
DBS
FX
&
Credit
Strategist
Chang
Wei
Liang
notes.

A
RBNZ
rate
cut
in
August
increasingly
possible

“NZD/USD
declined
0.6%
after
the
RBNZ
surprised
markets
by
stating
that
it
expects
inflation
to
return
to
the
1-3%
target
range
in
2H,
adding
that
it
could
temper
monetary
restraint
with
a
decline
in
inflation.
Markets
are
now
pricing
in
a
44%
chance
of
a
rate
cut
in
August.”

“The

RBNZ
is
also
diverging
from
the
RBA,
where
markets
still
see
a
risk
of
another
rate
hike
due
to
stubborn
inflation.
AUD/NZD
has
leapt
towards
1.11,
supported
by
widening
short-term
AUD-NZD
rate
differentials.”