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The slam-dunk of monetary events is supposed to occur later today. The Reserve Bank of New Zealand is expected to tighten interest rate policy. It is the key event in a relatively quiet week for G10 economies. To many the biggest event risk is the Governor Wheeler and company will do nothing in upcoming monetary policy statement. The RBNZ has held the OCR (overnight cash rate) at +2.5% for three-years now, and in that time, not at all dissimilar to other developed countries, Kiwi monetary policy has become very expansionary. Business confidence is running at a two-decade high, while consumer confidence just under a decade high, construction is booming and property prices are still rising. Probably more importantly is that inflation expectations are increasing. It's no wonder that both dealers and investors have priced in a +25bp interest rate hike that will likely have a limited effect on the Kiwi dollar. With a plethora of reasons to want to hike, there is probably an "even" chance that a +50bp hike is on the cards. If this does occur it would be a surprise and probably immediately catapult the currency towards last year's highs around 0.8675.
The slam-dunk of monetary events is supposed to occur later today. The Reserve Bank of New Zealand is expected to tighten interest rate policy. It is the key event in a relatively quiet week for G10 economies. To many the biggest event risk is the Governor Wheeler and company will do nothing in upcoming monetary policy statement. The RBNZ has held the OCR (overnight cash rate) at +2.5% for three-years now, and in that time, not at all dissimilar to other developed countries, Kiwi monetary policy has become very expansionary. Business confidence is running at a two-decade high, while consumer confidence just under a decade high, construction is booming and property prices are still rising. Probably more importantly is that inflation expectations are increasing. It's no wonder that both dealers and investors have priced in a +25bp interest rate hike that will likely have a limited effect on the Kiwi dollar. With a plethora of reasons to want to hike, there is probably an "even" chance that a +50bp hike is on the cards. If this does occur it would be a surprise and probably immediately catapult the currency towards last year's highs around 0.8675.
