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    RBNZ: Expect a 25bps cut in August – RBC CM Sandeep Kanihama

    Sue Trinh, Senior Currency Strategist at RBC Capital Markets, notes that the RBNZ left the OCR at 2.25%, as expected by consensus.Key Quotes“However, 7 out of 17 economists had expected a cut today and OIS discounted ~7bps of easing which prompted a short covering rally in NZD as short term interest rate expectations were revised a little higher.The statement highlighted the ongoing conflict between the (speculative heat in the) housing market, the elevated exchange rate and impact on financial stability. The RBNZ is looking to tighten macro-prudential policy and once implemented, we expect it will give the green light to cut the cash rate again; the RBNZ’s current projections point to at least one further 25bps cut and some chance of a second cut.The next decision (OCR Review MPS) is on 11 August, where RBC expects a 25bps cut. The RBNZ will be in data watching mode until then. AUD/NZD slumped down below 1.05 and NZD surged to 0.7139.”

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