Citi discusses its expectations for this week's RBNZ policy meeting. Citi also flags bearish seasonality for NZD in August and around the NZ elections in September.
"The RBNZ on Wednesday is the main focus for New Zealand, where policy will be left unchanged but risks are dovish. Citi Economics notes that activity data since the last forecast in May has recovered sufficiently to justify an upward revision to growth forecasts. However, of greater focus for markets will be the the RBNZ’s review of its monetary policy tools – especially around potential to adjust the LSAP (currently NZD60bn), purchasing foreign assets or implementing negative interest rate policy," Citi notes.
"August seasonality awaiting NZD. Seasonality shows that there is more risk avoidance in August than in other months, and in the G10 currency space NZD tends to fall in line with AUD. This is an anomaly, and we see no clear reason for this type of seasonality. However, with a general election due in September, if the market environment this year changes to risk-off again, the probability that NZD will depreciate over the next month, even if only temporarily, is likely to get higher," Citi adds.