MUFG sees RBNZ hiking to 3% today but under-delivering on pricing, flags NZD downside

MUFG’s call puts the risk squarely on the New Zealand dollar: with a hike almost fully priced, the currency’s G10 outperformance this month depends on the RBNZ endorsing a much steeper path than MUFG expects. Neutral or “wait and see” language could trigger a repricing of the roughly three and a half further hikes priced, pulling front-end yields lower and weighing on the kiwi, with AUD/NZD a likely beneficiary ahead of the RBA meeting on November 2 and 3. A hawkish surprise would delay that repricing, not prevent it, in MUFG’s view. Oil remains the main counterweight: further gains in crude would push up New Zealand’s fuel-driven inflation and make the market’s more aggressive path harder to unwind.