RBNZ remain too optimistic – Nordea Markets

In view of analysts at Nordea Markets, for NZD, last week wasn’t exactly the best of timings for a short position and it gained as RBNZ did little to converge towards the relatively dovish market expectations.

Key Quotes

“A bit like the Riksbank, RBNZ steadily keeps a too optimistic set of forecasts alive, even as leading indicators have worsened. RBNZ projects i) A lower unemployment rate towards 4.1% ii) a pick-up in GDP growth towards 3%, iii) a pick-up in non-tradables inflation towards 3%.”

“Recent signs from the business survey on wage growth rather point to a deceleration than an acceleration of wage growth. So, if the wage growth didn’t show up in an accelerating non-tradeables inflation during 2018, when businesses highlighted that risk, why should it show up during 2019, now that businesses have started to down tone the risk? The Philips-curve apologists within RBNZ need to answer that.”

“We remain sceptical on the RBNZ assumptions, in particular as leading indicators on unemployment point to a larger risk of higher unemployment than the opposite.”

“We stay long EUR/NZD.”