RBNZ Easing Bets Pared As NZ FinMin Proposes To Amend Central Bank's Remit

NZ money markets have seen some modest re-pricing of RBNZ easing bets, after FinMin Robertson wrote to RBNZ Gov Orr asking him to consider adding house prices to the central bank's remit. As we flagged multiple times before, NZ house prices have surged unexpectedly, in defiance of the impact of the coronavirus pandemic, inspiring concerns over housing market overheating. Should the new remit require the RBNZ to take house prices into account while making MonPol decisions, the MPC could be expected to seek to avoid adding fuel to the booming housing market. In his letter, Robertson proposed amending a key clause in the remit, so that it reads "seek to avoid unnecessary instability in output, interest rates, the exchange rate, and house prices," and asked the Orr to consider the idea as soon as possible.

• NZD/USD topped out at $0.6984, after taking out Dec 4, 2018 high of $0.6970, but has pulled back off best levels. Bulls look for a resumption of gains, which would take the rate above the psychological $0.7000 level, towards Jun 6, 2018 high of $0.7060.
• AUD/NZD has stabilised around current levels after taking a dip in reaction to the FinMin's letter. It last trades -32 pips at NZ$1.0491. The rate probed the water under Apr 21 low of NZ$1.0484 before ticking away from there. Bears now look for a slide towards the round figure/61.8% retracement of the YtD range at NZ$1.0400/1.0396. Bulls eye Monday's peak at NZ$1.0560.
• NZD/JPY has added 45 pips and trades at Y72.82, after printing a fresh cycle high at Y73.03. A move through Jan 16 high of Y73.35 would please bulls, opening up Dec 27, 2019 high of Y73.54. Bearish focus falls on Nov 19/13 lows of Y71.52/48.