Goldman: Searching For A Signal From The RBNZ

Goldman Sachs note that the upcoming “RBNZ meeting will be an important landmark for our long AUD/NZD view. Our economists expect the RBNZ to slow the pace of hikes to 50bps as inflation, the unemployment rate, and inflation expectations have all printed a bit softer relative to RBNZ forecasts over recent weeks. Meanwhile, the latest messaging from the Bank has been consistently hawkish. Nevertheless, we continue to think that the terminal rate will fall short of the RBNZ’s forecast of 5.50%, instead reaching only 5.00% in Q2 of this year.”

• “The meeting may not provide a clear negative impulse for NZD - our forecast is in line with market pricing - but a step down in the pace of tightening, or a revision to the terminal rate forecast, could be a signal that the RBNZ is turning more focused on growth. Housing market vulnerabilities especially are a significant concern in our view and could be a catalyst for future slowing.”
• “We continue to expect AUD/NZD to grind higher going forward, barring a material surprise from the RBNZ, though more catalysts may be needed to realize the policy shifts that we expect to benefit the cross.”