NZD/USD Will Decline This Year, Targeting 0.65 by Q3 - Westpac

NZD/USD Will Decline This Year, Targeting 0.65 by Q3 - Westpac

Imre Speizer, Senior Market Strategist at Westpac, notes that the US dollar is under renewed selling pressure, pushing NZD/ USD higher towards 0.7050.

Key Quotes

“That level marked a double top in April and May, but looks vulnerable now. That is because the shockingly weak US payrolls report released last Friday has caused markets to completely abandon the idea of a Fed rate hike in June, weakening the US dollar in the process. We expect such sentiment to linger this week.

In addition, the RBNZ’s MPS on Thu, while a close call, is expected to result in an on hold decision. If there is any sense the RBNZ may be reluctant to deliver the final rate cut in this easing cycle, then markets will buy the NZD in response. Beyond 0.7050 we would target 0.7200. The US calendar is quiet as we enter the Fed’s blackout period ahead of their 15 June meeting.

3 months: We maintain our view that NZD/USD will decline this year, targeting 0.65 by Q3. The basis for our view remains a combination of a looser RBNZ and a tighter Fed. That view has been hurt by a soggy US economy in Q1, a seemingly reluctant Fed, and a very weak jobs report last week. However recent we expect the Fed will see enough evidence of improvements in the labour market to hike in Sep. That is not fully priced, nor is an RBNZ cut in August. Surprises on both fronts will be NZD/USD negative.

1 year: Our economic fundamentals based forecast is 0.62.”