The Reserve Bank of New Zealand meets this week and there are some mixed expectations for the rate decision. Economists are projecting a 75bps rate hike to 4.25% from the current 3.5%. However, the short-term interest rates market sees it more as a coin flip between a 50bps or 75bps hike. At the last RBNZ meeting, the central bank surprised markets with a decidedly hawkish tone which sent the AUDNZD pair lower.

On November 2, Governor Orr said that the RBNZ is laser-focused on returning inflation to the 1-3% target. So, could the RBNZ surprise markets again? Will the USD also continue to weaken on expectations of lower inflation from the US?

Well, let’s take a look at the NZDUSD seasonals. If we get a fundamental reason for more NZD strength and USD weakness then note that the NZDUSD pair has risen an average of 1.08% between November 25 and December 10. All eyes are on the RBNZ for the November 23rd meeting!

Major Trade Risks: The major risk is that the RBNZ takes a more dovish stance and sends the NZD lower. The USD risk is that the Fed ends up needing to be more hawkish and the PCE print on Dec 01 comes in hot. So, plenty of significant risks with this outlook, but a pattern to note nonetheless.

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