RBNZ hawk juices Australian dollar

See the latest Australian dollar analysis here:

Bitcoin breaks neckline of monstrous head-and-shoulders pattern

Westpac with the note. For some reason market always conflate RBNZ and RBA so the AUD has followed NZD higher:

Today’s RBNZ Monetary Policy Review was more hawkish than May’s MPS, and had a more hawkish tone than markets had expected and priced. There were no changes to policy settings, as was widely expected. But guidance was substantially changed to reflect that the current level of accommodation could be reduced. In addition, and unexpectedly, bond purchases would end in a week.

Forward guidance, in the final paragraph in the press release, read: “The Committee noted that medium-term inflation and employment would likely remain below its Remit objectives in the absence of some ongoing monetary support. However, the Committee agreed that the level of monetary stimulus could now be reduced to minimise the risk of not meeting its mandate.”.

This compares to May’s: “The Committee agreed to maintain its current stimulatory monetary settings until it is confident that consumer price inflation will be sustained near the 2 percent per annum target midpoint, and that employment is at its maximum sustainable level. Meeting these requirements will necessitate considerable time and patience.”

On the LSAP programme, it said: “The Committee noted staff advice that while the Large Scale Asset Purchase (LSAP) programme has been an effective policy instrument to-date, market conditions and functioning have improved substantially since the programme’s inception. The Committee agreed that further asset purchases under the LSAP programme were no longer necessary for monetary policy purposes and directed staff to halt purchases by 23 July 2021. Members noted that the LSAP programme remains an important tool for supporting the efficient functioning of the New Zealand debt market if required, and remains an important monetary policy tool if needed.” While purchases have been defacto tapered over the past year, and we expected the programme to be wound down by year end, the early announcement on this was a surprise.

Ahead of today’s announcement, speculative NZD/USD fx positioning appeared to be slightly long. In interest rate markets, our best guess is that it was either slightly received (or equivalent) or neutral at the short end, and slightly paid (or equivalent) at the long end.

In response to today’s announcement, the 2yr swap rate rose from 0.88% to 0.92%, 10yr swap rates rose from 1.84% to 1.88%, and the 2031 NZGB yield rose from 1.60% to 1.63%. In currency markets, NZD/USD rose from 0.6965 to 0.7007, and AUD/NZD fell from 1.0700 to 1.0649. There is potential for these initial reactions to extend.

Houses and Holes

Comments

  1. Kiwibank and ASB lift term deposit rates as interest rate expectations rise … Bonnie Flaws … Stuff NZ

    https://www.stuff.co.nz/business/125745218/kiwibank-and-asb-lift-term-deposit-rates-as-interest-rate-expectations-rise

    The run of lower and lower mortgage rates may be ending with major ASB pushing through some chunky home loan rate hikes, along with some TD rate rises … Interest Co NZ

    https://www.interest.co.nz/personal-finance/111285/run-lower-and-lower-mortgage-rates-may-be-ending-major-asb-pushing-through

    Reserve Bank to halt bond-buying using newly printed money by July 23; OCR and Funding for Lending Programme unchanged … Interest Co NZ

    https://www.interest.co.nz/news/111295/reserve-bank-halt-bond-buying-its-lsap-programme-july-23-ocr-and-funding-lending

  2. OCR tipped to rise next month after Reserve Bank calls early end to ‘QE’ … Tom Pullar – Smith … Stuff New Zealand

    https://www.stuff.co.nz/business/125733599/ocr-tipped-to-rise-next-month-after-reserve-bank-calls-early-end-to-qe

    ANZ and ASB are forecasting the Official Cash Rate will go up to 0.5 per cent next month, after the Reserve Bank called time on “quantitative easing”.

    The Reserve Bank held the Official Cash Rate at 0.25 per cent when it released its monetary policy review on Wednesday.

    But it reduced its monetary stimulus by announcing it would terminate its quantitative easing (QE) programme a year earlier than originally expected.

    The Reserve Bank had been using QE to depress medium and longer-term interest rates, which could now be expected to flex higher. … read more via hyperlink above …

    The national median selling price was barely changed at $820,000 in June compared to May, down slightly from the March peak … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/111267/national-median-selling-price-was-barely-changed-820000-june-compared-may-down

    The housing affordability crisis is likely worse than you think … Charlie Mitchell … Stuff New Zealand

    https://www.stuff.co.nz/life-style/home-property/300339165/the-housing-affordability-crisis-is-likely-worse-than-you-think

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