NZD longs at risk if the RBNZ is dovish - BNPP

The Reserve Bank of New Zealand appears likely to keep rates on hold at its meeting on Thursday, according to analysts at BNP Paribas.

Key Quotes

“Focus will be concerns about inflation after the disappointing Q2 rate of 1.7%, which was also followed up by weaker labour market data. The RBNZ may also be concerned about continued NZD strength; our estimates suggest that NZD strength still presents a significant headwind for inflation.”

“Concerns about softer inflation could prompt a dovish tone from the RBNZ, which could lead to the market’s long NZD position being unwound. Following the Reserve Bank of Australia’s meeting this week, its statement on monetary policy is released on 4 August, followed by a speech from RBA Governor Philip Lowe the following Friday; any dovish comments could add to AUD losses.”