The Reserve Bank of New Zealand meet this week and there are some mixed expectations for the rate decision. Economists are projecting a 75bps rate hike to 4.25% from the current 3.5%. However, short term interest rates market see it more as a coin flip between a 50bps or 75bps hike.
At the last RBNZ meeting the central bank surprised markets with a decidedly hawkish tone which sent the AUDNZD pair lower.
On November 02 Governor Orr said that the RBNZ is laser focused on returning inflation to the 1-3% target. So, could the RBNZ surprise markets again. Will the USD also continue to weaken on expectations of lower inflation from the US?
Well, take a look at the NZDUSD seasonals. If we get a fundamental reason for more NZD strength and USD weakness then note that the NZDUSD pair has risen an average 1.08% between November 25 and December 10.
All eyes on the RBNZ for November 23’s meeting
Major Trade Risks:
The major risk is that the the RBNZ take a more dovish stance and send the NZD lower. The USD risk is that the Fed end up needing to be more hawkish and the PCE print on Dec 01 comes in hot! So, plenty of significant risks with this outlook, but a pattern to note nonetheless.
Remember, don’t just trade it, but Seasonax it!