RBNZ on hold but signal further easing likely - BNPP

Research Team at BNP Paribas, notes that the RBNZ left policy rates unchanged at 2.00% as expected and Governor Wheeler said in the statement that further easing is likely to be required and reiterated that they think a decline in the NZD is needed.

Key Quotes

“The market has interpreted this as a strong signal for a rate cut at their next meeting on 10 November, with a cut now 70% discounted into rates markets.

Ahead today, with Norwegian inflation likely to run above target until H2 2017 and the near-term growth outlook firmer, the Norges Bank is unlikely to cut interest rates again in 2016. However, we think any rallies in the NOK should be seen as a selling opportunity, with the currency remaining sensitive to global developments – our short-term fair value model, BNP Paribas STEER™, highlights that global equities are a key factor explaining the variations in the fair value. We  forecast a rise in EURNOK to 9.40 by the year end.”