That's the view of some bank analysis ahead of the meeting
Westpac
Expects RBNZ to cut by 25bps and signal further easing in the statement, a 30bps cut in their projections (they see that as a 60% chance and market neutral)
To move NZD significantly lower they'd need to lower rates by around 50bps
"In this scenario (a 25% chance we think), NZD/USD would fall by 1c and the 2yr swap rate by around 10bp. An extremely dovish scenario would see the RBNZ cutting by 50bp. That would push NZD/USD 2c lower, and 2yr swaps around 20bp lower. However we see less than a 10% chance of that."
Barclays
Expects cut of 25bps then further cut at another meeting in Q4 2016
"With a full 25bp nearly fully priced by the market for the August meeting, we expect muted reaction on a cut. However, a dovish statement more clearly signaling further cuts in coming months could drive more significant weakness in the NZD."
BOAML
A 25bps cut is almost certain
Mon pol in the antipodes still has some way to go
Sees more scope for an extended RBNZ easing cycle over coming months in light of strength to NZD relative to RBNZ forecasts
A 50bps could signal panic before new housing measures are in place
The economy appears to retain solid momentum
One cut may not be enough to lower NZD but a deeper easing cycle could be
"Despite its depreciation following dovish RBNZ commentary in July, the NZD remains at an elevated level compared to recent history. While a 25bp rate cut may not be sufficient to materially weaken the NZD in the face of strong carry-seeking flows, it seems necessary to keep monetary conditions at a stable level. The New Zealand economy might not warrant significantly looser monetary policy just yet, but neither can it afford much tighter monetary conditions due to the exchange rate. At the same time, it is worth noting that the three-month carry-to-implied volatility ratio for NZD/USD is already close to the lows seen during the global financial crisis. The relentless search for positive yield may continue, but an erosion of NZD's volatility-adjusted carry to fresh lows may be more of an impediment to appreciation than currently assumed. A sufficiently large cut to the RBNZ's Bank Bill forecast could yet weaken the NZD further especially relative to the AUD, where it would contrast with a more stable outlook for the policy rate"
We know which way the market is leaning so the chances are that a 25bps cut is unlikely to sink the kiwi by any meaningful amount. It will take very dovish message about more cuts to do that. So, tonight it's not about the cut (unless it's more than 25bps), it's about the message that comes with it. If the market doesn't see it as overly dovish, we're likely to see NZD rise. If they are dovish (and dependant on how much) then we could well see a move lower of 100-300 pips. We'll see an initial drop and then we'll see short period of further downside which will bring some of those strong looking support areas into play.
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