Westpac forecasting no change in the OCR at the November MPS

Analysts a Westpac are now forecasting no change in the OCR at the November MPS.

Key comments:

• The balance of recent domestic data does not justify a cut, global sentiment has improved, and overseas central banks have indicated they will pause.
• We expect the RBNZ will remain open to future OCR cuts if necessary, similar to the rhetoric issued in September.
• The RBNZ’s OCR forecast will continue to imply a 50/50 chance of a future cut.
• We are now forecasting a cut in February, based on our view that global economic sentiment will worsen again.
• Holding the OCR in November would surprise financial markets, causing a lift in interest rates and the exchange rate.

FX implications:

Market pricing for RBNZ is for 18bp of easing on 13 November, with a terminal rate of 0.66%, according to the analysts, which is a weight on the bird. The 38.2% Fibo of the October range has been a supportive factor of late,  around 0.6350 which likely guards risk to 0.62 the figure.