RBA and RBNZ: Trading places – TDS

Analysts at TDS have delayed the starting point for their RBA tightening cycle from November 2017 to May 2018.

Key Quotes

“We maintain that the RBA “should” hike to attract much-needed offshore capital and address household imbalances. In contrast, the RBA is demonstrating extreme patience, supported by disappointing data flow in recent weeks.”

“In contrast, we bring forward the first RBNZ hike from May to February 2018 amid strong macro fundamentals and a regime change of RBNZ Governor towards well-known hawk Grant Spencer.”

“Our new RBA view means little for Australian rates and the AUD while our more aggressive RBNZ stance from November is currently underpriced. We expect much higher 2yr swap rates and fresh NZD outperformance by year end and into early 2018.”