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Macro Dragon: RBNZ blinks as it keeps rates on hold at 0.25%, following the nation-wide lock-down announced on Tue over one covid-case in NZ
Kay Van-Petersen
Global Macro Strategist
Summary: Macro Dragon checks back in on the RBNZ rate decision to leave rates unchanged at 0.25%, which is a big difference from the hikes expectations from just earlier this wk - with the key caveat being the covid-case that has taken NZ to a country wide shutdown.
(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)
Macro Dragon: RBNZ blinks as it keeps rates on hold at 0.25%, following the nation-wide lock-down announced on Tue over one covid-case in NZ
Top of Mind…
- So KVP's view that the RBNZ was going to hike was wrong, looks like the RBNZ has blinked & folded on what was previously signaled as a potential series of hikes… which would have made them the first G10 central bank to hike on the other side of the Covid pandemic. So looks like that honor may have to fall on Norges Bank or perhaps the BoE or BoC.
- The Covid-shuffle continues… remember.. “3 steps fwd, 2 steps, shuffle to the left, the shuffle to right…”
- Its astounding to the Macro Dragon, that somehow the RBNZ was expecting to never have to encounter a covid outbreak again, let alone lockdown… for a measly +25bp hike, yet pretty much clearly point out themselves that employment is running at a maximum sustainable lvl, house prices are up (talk to any kiwis about property prices let alone trying to get builders & handypersons), yet somehow they extrapolate on a lot of inflationary pressures being one-offs… hmmm…
- This is likely another clear signal that NZ is massively behind where it needs to get to opening up its economy, ramping up its vaccine penetration (sub 20% for fully vaccinated) & learning that the hammer + dance strategy is not a long-term viable solution…
- It may also be interpreted as the RBNZ know something else that the rest of the mkt does not, perhaps we have a longer lock down on the cards in NZ than planned... its looking like now we have 6 cases, but potentially also traces to social areas like pubs & clubs which intuitively may already have us in the 50 - 150 range once the tracing ins complete.
- The RBNZ press conference is being interpreted as a hawkish hold… which KVP has zero idea, of what that actually means. If you are hawkish your are hiking, if your dovish your cutting. If your bullish your long, if your bearish your short.
- Asia morning NZDUSD 0.6747 +0.40% looks set to try to grind up intraday… whilst AUDNZD 1.0459 -0.26% looks set to go back lower…
- From the Macro Dragon side, currently its hard to get back on those bandwagons of being long kiwi… especially as next RBNZ is not until 6 Oct. And hard to see them raising in between meetings given just how behind the country is on modernizing its strategy to understanding that they have to live with Covid… the zero-policy response is pure fiction & stale.
- This virus is going to be part of every country’s modern day life & annual vaccination run – one’s again big pharma wins.
- Its worth noting we got the key Aussie jobs data on this Thu & the risk is to AU data & policy response overall surprising to the hawkish side vs. their NZ cousins. So far Australia's Sydney (23% of pop) has been in lock-down for close to 8wks & continues to struggle with a surge. Yet as we get towards year end we start to tick towards summer returning to the Southern Hemisphere (& winter in the Northern Hemisphere), which should help in curbing the Covid surge.
- Here is the link to the RBNZ statement
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