🏦🇳🇿Cable FX Macro Weekly Note: RBNZ April OCR Decision

**As seen in Risk In The Week report 03/31/23, subscribe at cablefxm.co.uk/reports

The RBNZ delivered a 50bps rate hike in February, this lifted the OCR to 4.75%. The central bank has brought a total of 450bps of tightening during this cycle, while inflation remains at a three-decade high at 7.2%. Heading into the meeting, analysts had seen potential for an adjustment of the OCR path, however, the RBNZ kept its projection steady of a peak at 5.5%. The recent central bank repricing has not been isolated to the ECB and the Fed, the desk at Westpac now sees the OCR peaking at 5.0%, meaning this would be the central bank’s last move during this cycle. This could turn into a toxic mix for the kiwi as carry attractiveness fades heading into a recession, strategists at J.P. Morgan noted that the currency tends to underperform during periods of economic slowdowns. It is difficult to quantify how much of this is already priced in, as the NZD has been one of the worst performer G10 currencies so far this year. Analysts at MUFG expect one final 50bps rate hike from the RBNZ as the central bank determines the impact of the cyclone, they also say that the hawkish rhetoric is offset by the flexibility to pause.