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May 22 - 09:55 AM

MUFG: Bullish on NZD/CAD Amid Widening Policy Divergence Between RBNZ and BoC

By eFXdata  —  May 22 - 08:30 AM


MUFG outlines a bullish outlook for NZD/CAD, driven by diverging monetary policy directions between the Reserve Bank of New Zealand (RBNZ) and the Bank of Canada (BoC). The firm attributes its stance to recent hawkish updates from the RBNZ and dovish shifts in BoC rate expectations.

Key Points:

  • RBNZ Hawkish Update: The RBNZ's recent policy projections indicate a slight increase in the expected peak for the official cash rate (OCR), hinting at a potential additional rate hike this year.
  • BoC Dovish Shift: In contrast, Canadian monetary policy expectations have softened, with markets now anticipating a possible rate cut as early as June, influenced by a series of lower-than-expected core inflation readings.
  • Market Reactions: These developments have fostered a favorable environment for NZD strength against CAD, further supported by improving external market conditions.
  • Forecasts: MUFG predicts continued NZD and AUD outperformance against CAD, with USD/CAD likely maintaining higher levels in the near term due to the anticipated policy divergence.


MUFG maintains a bullish stance on NZD/CAD, expecting that the widening policy divergence between the RBNZ and BoC will bolster the kiwi. The bank also anticipates broader strength for the NZD and AUD against the Canadian dollar, reflecting a significant shift in central bank policies between New Zealand and Canada.

MUFG Research/Market Commentary


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