NZD: Positive 3Q CPI surprise may fuel hawkish RBNZ repricing - ING

Analysts at ING note that despite the political vacuum in New Zealand, the kiwi continues on a recovering trend amid a benign bond market environment.

Key Quotes

“While it is expected that a government will be formed this week - although it does it appear that NZ First's leader Winston Peters is taking his time to choose his coalition partner - NZD price action will likely take its cue in the week ahead from the 3Q CPI release (Mon). The consensus is looking for a small pickup to 1.8% YoY, still a tad shy of the 2% midpoint of the RBNZ's target band.”

“Under a National-NZ First coalition, we suspect RBNZ rate hike expectations could nudge forward into the middle next year (relative to the current pricing of a Sep-2018 hike). A positive CPI surprise would support this story. We look for NZD/USD to continue moving higher towards 0.7240 (50% retrace of the recent election-related move lower) - with our target for 0.74 by year-end.”