RBNZ Delays Capital Buffer Increase, Consults About Reinstating LVRs Ahead Of MPS

NZD/USD wavered Tuesday, but managed to extend its winning streak to seven straight sessions at the end of the day. There was little new to drive price action, which prompted a reassessment of familiar risks.

• Main focus today falls on the RBNZ's last MonPol decision of the year. We have published our comprehensive of the upcoming MPS - click hereto access. Policymakers are expected to unveil the details of a Funding for Lending Programme, to be launched by the year-end.
• Mind that New Zealand's central bank has since published a statement noting that it will consult about the re-introduction of LVR restrictions on high risk lending, effective from Mar 1. We flagged that the pace of house price inflation remains a concern. FinMin Robertson lauded the RBNZ's decision to consider reinstating LVRs as "sensible".
• In addition, the RBNZ said that it "is further delaying the start of increases in bank capital until [July] 2022" to give lenders the chance to respond to the impact of the Covid-19 pandemic.
• NZD/USD last trades flat at $0.6830, just shy of cycle highs. A clean break above Nov 9 high of $0.6855 would confirm that the uptrend is intact, opening up the $0.6939-42 zone, which capped gains in 1Q2019. Bears look for a dip through the 23.6% retracement of the Sep 24 - Nov 9 rally/Nov 9 low at $0.6774/73 before targeting the 50-DMA at $0.6662.
• Later in the week, focus moves to BusinessNZ M'fing PMI & food price index, both due Friday.