Synopsis:

ANZ highlights that the upcoming RBNZ meeting is unlikely to spark a positive shift for the NZD. Market expectations of a 50bp rate cut align with ongoing dovish policy trends, keeping downside pressure on the NZD against the USD and AUD. While year-end seasonality could provide some upside, near-term prospects remain neutral to negative.

Key Points:

• RBNZ Meeting Expectations:

  • ANZ expects a 50bp rate cut, consistent with market pricing.
  • Recent RBNZ meetings have been NZD-negative, with even “hawkish” surprises yielding only brief gains.
  • A more dovish result, such as a 75bp cut, could result in a 1% or more decline in NZD/USD.

• Economic Backdrop:

  • New Zealand’s activity data, including PMI and PSI, remains soft despite slight improvements from June cycle lows.
  • Positive surprises in Q3 GDP and employment data have not changed the broader trend of economic weakness, supporting further RBNZ rate cuts.

• NZD Performance:

  • Downward pressure on NZD/USD and AUD/NZD is likely to persist, with AUD/NZD expected to hold above 1.10.
  • Year-end seasonality could provide some upside for the NZD, but current market conditions remain unfavorable for sustained gains.

Conclusion:

ANZ remains neutral to negative on the NZD heading into the November RBNZ meeting. While a 50bp rate cut is expected to have a limited impact, the dovish policy outlook and weak economic data keep downside risks intact. Any potential NZD upside into year-end will likely be constrained by the challenging market backdrop.