The RBNZ makes a policy announcement at 21:00 GMT on Wednesday (Thursday 9am NZ time) and Consensus is finely balanced with a slight majority of forecasters calling for unchanged policy at 3.50%, notes BNP Paribas (PARIS:BNPP).
"We side with that view noting that although the RBNZ rhetoric has signalled possible policy easing, recent data does not offer a clear trigger for the move. Furthermore, the trade-weighted NZD is down around 3% over the past month, which should ease the Bank’s concerns over FX levels," BNPP argues.
"Given that NZD shorts are extreme according to our positioning indicator we think steady policy and a less-than-very-dovish message could see the NZD rebound," BNPP adds.
In line with this view, BNPP maintains a short AUD/NZD position from 1.078, with a stop at 1.0945, and a target at 1.0340.