RBNZ: A further 50bps of cuts in 2019 – TDS

TD Securities analysts have pencilled in cuts by RBNZ for Aug'19 and Nov'19.

Key Quotes

“Deteriorating fundamentals and a firmer NZD are catalysts for RBNZ cuts.”

“Similar story to AUD, though we like buying AUDNZD dips towards 1.04. Rallies are likely capped in the short-term around the 1.07 level.”

“Risk: The increase in capital requirements drives the RBNZ to cut in 2020 to 0.75%.”

“Where we could be wrong:

• The likelihood of a truce between the US and China would remove pressure on Central Banks to ease. Any signs that spare capacity is being absorbed faster than anticipated and/or domestic consumption and investment picks up would provide the RBA and RBNZ time and hold off from easing.”