• Expecting the RBNZ  to hold today, but to cut 25bps in November, although it is not a done deal.
• Kiwi higher by 0.50% having ranged between 0.6287 and 0.6330.

NZD/USD is pulling back off from the recent daily lows scored at the end of last week as traders price out a rate cut from the Reserve Bank of New Zealand tonight and instead wait to see how the central bank's board perceives the outlook to be. Currently, NZD/USD is trading at 0.6323 and is higher by 0.50% having ranged between 0.6287 and 0.6330. 

Casting minds back to the prior meeting, the RBNZ cut the OCR by 50bps in a move that was met by the markets surprise leading to a huge spike to the downside in the bird and subsequent lower levels as the bird continued to weaken. The move was exceeding the Bank's own 25bps Aug MPS forecast - However, this time around, we have seen that second-quarter Gross Domestic Product  in line with the RBNZ's expectations and the NZ TWI more than 4% below its August MPS projections, and therefore, there is growing anticipation that the Bank will likely sit in their hands for now and see how various developments pan out - Markets agree, pricing only 6bp worth of easing at the meeting.

RBNZ to hold in September, cut in November

There will be a focus on forward projections considering how the 2020 mid-year GDP forecasts for around 3% annual growth seems overtly bullish and beyond what most observers could agree upon. Downside risks to such a forecast are what could lead to a weakening in the Bird as the markets price in a rate cut for the meeting in November. Analysts at TD Securities noted that the trade war has worsened, the growth outlook deteriorated further and have added a further easing by the RBNZ (Nov).

However, the long Dollar trade is fraught with political dangers considering the recent impeachment threats to Trump's presidency which lead to a sell-off in US assets today, weighing on the Greenback - (DXY -0.22% time of writing). 

"We expect the RBNZ to cut 25bps in November, although it is not a done deal. For now, markets are happy to continue pricing in a terminal rate of around 0.6%, little changed over the past few weeks,"

analysts at Westpac explained. 

NZD/USD levels