15 Nov 2013
Flash: Will NZD feel the weight of a falling NZ-US interest rate differential? - BNZ
FXstreet.com (Barcelona) -On New Zealand local housing data, the indicators have recently been very weak, suggesting some downside risks for the Kiwi, as it may force the RBNZ to delay its tightening cycle, says Mike Jones, FX Strategist at BNZ.
Key Quotes
"The BNZ-REINZ Residential Market Survey also paints a picture of collapsing housing demand, particularly amongst first home buyers. The number of respondents expecting an increase in investors looking to make a purchase has fallen to a net 6%, from 26% in September. A net 23% feel that house prices are rising, down from a net 51% only two months ago."
"These warning signs have so far been shrugged off by the market. The local OIS curve continues to plump for March as the most likely start of the RBNZ tightening cycle (80% priced), with even January still being priced as an outside (20%) chance."
"Our own view is that ongoing strength in the TWI and a ‘wait and see’ approach on housing will stay the Bank’s hand until June. But we may need to see weakness in upcoming hard NZ housing data (REINZ, Barfoot, and QVNZ) to convince the market of this. If it does (date due in early December), the NZD would feel the weight of a falling NZ-US interest rate differential."
Key Quotes
"The BNZ-REINZ Residential Market Survey also paints a picture of collapsing housing demand, particularly amongst first home buyers. The number of respondents expecting an increase in investors looking to make a purchase has fallen to a net 6%, from 26% in September. A net 23% feel that house prices are rising, down from a net 51% only two months ago."
"These warning signs have so far been shrugged off by the market. The local OIS curve continues to plump for March as the most likely start of the RBNZ tightening cycle (80% priced), with even January still being priced as an outside (20%) chance."
"Our own view is that ongoing strength in the TWI and a ‘wait and see’ approach on housing will stay the Bank’s hand until June. But we may need to see weakness in upcoming hard NZ housing data (REINZ, Barfoot, and QVNZ) to convince the market of this. If it does (date due in early December), the NZD would feel the weight of a falling NZ-US interest rate differential."