### POV: UNCHANGED RBNZ, CAUTIOUS APPROACH -...>

KIWI: ### POV: UNCHANGED RBNZ, CAUTIOUS APPROACH

- The Reserve Bank of New Zealand (RBNZ) is expected to leave the overnight cash

rate (OCR) unchanged at 1.75% at its meeting today, scheduled for 2100GMT.

- This will be Governor Orr's first monetary policy statement under the new

Policy Target Agreement (PTA) after moving to a dual mandate to support maximum

levels of sustainable employment.

- CPI remains the biggest concern and after the Q2 2-year inflation expectations

were revised lower to 2.01%, this signalled no imminent tightening of policy.

- Narrowing yield differentials amid a bearish outlook witnessed sharp NZD falls

against the USD in April (near 3.0%), with current losses of 1.08% this month.

Seasonal trends have also seen NZDUSD lose ground in May, five of the last six

years.

RISK - China's trade balance returned to surplus last month, reversing a deficit

and could prove to be supportive. Market talk also suggests Governor Orr could

take a more hawkish approach with the OCR path, providing short-term relief for

the Kiwi.