RBNZ decision due at the top of the hour
Two of 16 economists surveyed by Bloomberg expect a surprise rate cut from the RBNZ today but the ratio of market participants may be higher.
TD Securities and Macquarie are the only ones officially calling for a cut but chatter in the market about a surprise move is everywhere. The NZDUSD chart has tumbled for 5 straight days and is hovering just above the January low.
NZDUSD daily
The futures market for New Zealand is less liquid than elsewhere, so the 3 month bill is the only thing to get a read from. A constant 3 month bill reading has shown slightly higher rates since the surprise RBA cut in February. It shows the chance of a cut today around 15%.
Wheeler has long relished a weaker NZD and the milk-poisoning scare may give him a reason to move today. Technically, he would be able to break the back of NZD but only if he signalled more cuts were possible.
Given the strength of the New Zealand property market that might not be a wise move.
I don't see a truly great trade shaping up. I suspect Wheeler won't cut but I don't believe fast money is piled into shorts so a squeeze would be limited and could even be reversed by dovish rhetoric, or even Wheeler's standard jawboning.
For more, check out Eamonn's outstanding RBNZ preview.
