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28 Jan 2015
RBNZ to fully deliver on dovish expectations - Deutsche Bank
FXStreet (Bali) - According to Robin Winkler, FX Strategist at Deutsche Bank, the RBNZ will fully deliver on the market’s expectation of significantly more dovish rhetoric.
Key Quotes
"Regardless of its true reaction function, we think the RBNZ will fully deliver on the market’s expectation of significantly more dovish rhetoric at this point."
"With the next detailed MPS scheduled for March, the RBNZ may decide to use Thursday’s 400-word policy assessment – inevitably an ambiguous and noncommittal tool of forward guidance - to play to market expectations."
"Specifically, we expect Wheeler to reiterate that the exchange rate is “unjustifiably and unsustainably high”, despite its recent fall both against USD and in trade-weighted terms. More importantly, we expect the line that “some further increase in the OCR is expected to be required at a later stage” to be dropped."
"In spite of its vagueness, the RBNZ will have learnt in December that the FX market is still sensitive to this statement and will likely remove it at little cost to long-term forward guidance. Even if the RBNZ internally expects to hike eventually, the market will likely interpret this as confirmation of the removal of its tightening bias."
Key Quotes
"Regardless of its true reaction function, we think the RBNZ will fully deliver on the market’s expectation of significantly more dovish rhetoric at this point."
"With the next detailed MPS scheduled for March, the RBNZ may decide to use Thursday’s 400-word policy assessment – inevitably an ambiguous and noncommittal tool of forward guidance - to play to market expectations."
"Specifically, we expect Wheeler to reiterate that the exchange rate is “unjustifiably and unsustainably high”, despite its recent fall both against USD and in trade-weighted terms. More importantly, we expect the line that “some further increase in the OCR is expected to be required at a later stage” to be dropped."
"In spite of its vagueness, the RBNZ will have learnt in December that the FX market is still sensitive to this statement and will likely remove it at little cost to long-term forward guidance. Even if the RBNZ internally expects to hike eventually, the market will likely interpret this as confirmation of the removal of its tightening bias."