Flash: RBA/RBNZ rate convergence in the cards? – UBS

FXstreet.com (New York) - Overnight, the RBNZ shifted stance and adopted an unmistakable explicit tightening bias, noting that a 'removal of monetary stimulus will likely be needed in the future', notes Gareth Berry, a Research Analyst at UBS.

Key quotes

“This is the first step towards an eventual rate hike, which our NZ economist thinks could come as early as December. The news had a sense of near inevitability about it. In anticipation, we went short AUD/NZD as a trade recommendation way back on Feb. 1, expecting a gradual convergence of policy settings in Australia and New Zealand.”

“This process of convergence is well underway – the RBA has already cut once since then, and seems likely to cut again on August 6. This would bring policy rates in New Zealand and Australia into line at 2.5% each.”