NZD squeezes higher ahead of key RBNZ meeting

NZD squeezed 60pts higher overnight on comments from PM Key that "NZD has fallen faster than expected" and that the economy is "still growing at a good pace." 

The sharpness of the move is perhaps evidence of just how short NZD the market is heading into this week's RBNZ meeting. The RBNZ decides on interest rates next Thursday and a further 25bp rate cut is expected to take the cash rate to 3%. 

"With underlying inflation remaining well below the 2% target and the outlook for growth weaker due to lower export prices, now, an additional two 25bp cut is expected in September and December", says Barclays.

This would reverse all of last year's rate hikes and return the cash rate to its record low of 2.5%.