FXStreet notes that the RBNZ is likely to keep the cash rate on hold at 0.25% and make no changes to the LSAP size (NZD 60 billion). Economists at TD Securities lay out three scenarios and the dovish one could lift the kiwi, which is surging +0.63% to 0.6520 as of writing, towards 0.6545.
“Dovish (30%): RBNZ announces the LSAP has been upsized or indicates this is under consideration. Offshore covid cases are accelerating, this could hit global growth, in turn impacting NZ growth. The high NZD is a constraint on the RBNZ achieving its inflation objectives. Impact of NZ drought worse than initially expected. NZD/USD at 0.6545.”
“Neutral (65%): No major changes. Domestic outcomes have been better than expected but risks are still skewed to the downside. NZD/USD at 0.6475.”
“Hawkish (5%): Bank indicates ‘Risks as evenly balanced’. The Bank removes any mention that the OCR will remain at 0.25% until early 2021 if the Bank is upbeat in other aspects of the statement. It's still too early for the RBNZ to turn hawkish as 2nd wave cases and virus hotspots garner more attention. NZD/USD at 0.6440.”
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