The RBNZ is going to meet at 01:00 tomorrow (February 24). Afterwards, the RBNZ will hold a press conference at 0200. The most likely result is that the RBNZ will have no change to the policy, but will give a conservative summary that will fail to hold back NZD strength.

The recent run of economic data for New Zealand has been good. The rising 2-year inflation expectations, housing prices increase, as well as falling unemployment (February saw a surprise fall to 4.9%), all mean the NZD should still face buying pressure. On top of this improving data, the potential for negative rates has also receded with the current monetary policy seen to be working.

NZD strength

This means that the broad outlook for the NZD should be more strength. Yes, the RBNZ will not want to push ahead of the Fed in terms of rising interest rates, so expect the potential for a dovish tilt in the bank’s rhetoric talking about ‘risks’ ahead etc.

Economists polled by Reuters ahead of tomorrow’s meeting expect rates to remain unchanged at 0.25%. Finally, the RBNZ shadow board said (a kind of duplicate of the board which meet before the ‘real board’ meeting) there was no ‘need for change’ at this meeting. Read their full report.

NZDJPY long bias likely to remain

This means that the NZDJPY should remain a buy on dips after the RBNZ decision.