RBNZ to deliver another 25bps cut at this morning’s OCR review

RBC Capital Markets notes:

We expect the RBNZ to deliver another 25bps cut at this morning's OCR review. Indeed, given the weak rate of underlying inflation and steep falls in dairy prices, we recently shifted our profile to include easing at every meeting up to and including October. For NZD, we have a bias towards long NZD/JPY this week though.

With positioning heavily short and OIS market priced for more than a cut (~28bps) we think the risks are skewed to the upside for NZD unless the RBNZ delivers a 50bps cut or promises of much more aggressive further easing. While that is possible, it would smack of a central bank in a panic and so we expect only a 25bps cut at this stage.