The NZD/USD outperformed along with the AUD/USD over the past 24-hours. It sits at 0.8320 this morning. There was not too much domestically to drive the currency yesterday. The RBNZ announced that residential construction activity will be exempted from recent LVR restrictions. The implications for monetary policy are negligible as we head into tomorrow’s Monetary Policy Statement, but it does show the devil may be in the detail of macro-prudential tools. Heading into tomorrow’s RBNZ meeting the market prices a first OCR hike by March, and almost 125bps of hikes by the end of next year. This is consistent with our own views. However, we do think the market is likely ahead of itself in pricing almost a 40% chance of a 25bps hike by January.
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