NZD/USD below 0.7300 would then pave the way to 0.7200 - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD had a good run last week, helped by the surge in dairy prices, but starts this week on the back foot.

Key Quotes

“Souring risk sentiment, driven by concerns global central banks may be reluctant to ease monetary policy much further, will hurt commodity currencies, even those with strong economies such as the NZD. NZD/USD below 0.7300 would then pave the way to 0.7200 this week.

The highlight of NZ’s busy data calendar this week is the Q2 GDP release on Thursday. It should show the economy in rude health, with 1% q/q and 3.5% y/y broad-based growth rates. The Q2 current account deficit (Wed) should narrow further to 2.6% GDP – the smallest since Sep 2014. There’s also manufacturing PMI (Thu) and ANZ consumer confidence (Fri) to watch.

The US calendar still has the potential to shake up 21 Sep Fed hike probabilities, though the data needs to be exceedingly strong – Aug retail sales and CPI the main releases.

3 months: We target 0.70, based on an assumption the Fed will hike in Dec and the RBNZ will cut in November and possibly again after that. However the persistent backdrop of global demand for high-yielding currencies is strong - if the Fed doesn’t hike, then 0.75+ is likely instead.

1 year: Our economic fundamentals-based forecast is 0.65.”