NZD weakness likely if RBNZ cuts

There are narrow expectations from the RBNZ to cut its interest rates next week, which will be fourth time in the year, reducing the cash rate by 25 basis points to 2.5%, which would fully reverse last year's rate hikes.

A cut can be likely, given a weaker outlook and with average underlying inflation remaining below the RBNZ's target. 

The central bank might want to extend its hold to collect more information on economy, specifically when one of the key underlying inflation measures is picking up for first time in many years.

"In terms of the RBNZ's updated outlook, we think the forecast profile will build in a further cut next year, as well as a weaker exchange rate. We recommend being short NZD/USD going into the meeting, considering that a rate cut is not fully priced", says Barclays in a research note.