The RBNZ felt that the dollar would fall toward a TWI of 47 – not lift to 55. As the Bank is currently focused on short-term economic activity, rather than inflation, the sudden lift in the TWI will actually give them more reason to cut harder in April.
Given this increasing risk of a larger cut I think iPredict has a good set of prices at the moment. 25 is still the most likely, but 50 has a good chance – although to be fair I did buy a small number of 50’s when I saw the relative price 🙂 .
On the no change side I think the market is highly over-pricing it – given that the Bank said it would only stop cutting when it is positive that they have hit the bottom of the cycle – as a result having a 22% chance of no change is not consistent with the 96% chance the market currently has on an OCR under 3% 😛 (as a result, I shorted a slightly larger bundle of these).