NZD/USD: Scope for a Decline to 0.65 in 3 Months - Rabobank
According to analysts from Rabobank, the current environment in New
Zealand could lead to a signal that the Reserve Bank of New Zealand
(RBNZ) could cut rates again opening the doors for a decline in the NZD/USD pair to 0.65 on a three-month view.
“The relief rally that followed the decision by the RBNZ on April 27 to leave rates on hold did not last long. NZD/USD this morning traded at its lowest levels since March as the market prepared for the likelihood that RBNZ could cut interest rates again as soon as June 8.”
“Despite the headwinds coming from the dairy sector the government recorded a surprise budget surprise in the first nine months of the fiscal year to March 31. This will ease the burden for Finance Minister English as he delivers his eighth budget on May 26.”
“The difficult issue of private debt falls squarely on the shoulders of the central bank and this week English suggested that the RBNZ may considered further restrictions on mortgage debt. The RBNZ will have the opportunity to reveal how concerned it is by the elevated levels of both dairy and mortgage debt when it publishes its semi-annual Financial Stability Report tomorrow. In March the RBNZ reported housing debt growth of 8% y/y.”
“If macro-prudential measures are tightened, this is likely to be taken as a signal that the RBNZ will be more prone to cut rates again in June. We see scope for a move towards NZD/USD 0.65 on a 3 mth view.”