NZD/USD: Push below 0.70 will require a dovish surprise from the RBNZ - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD took a 1c knock from the strong US payrolls report on Friday but to push the pair below 0.70 this week will require a dovish surprise from the RBNZ.

Key Quotes

“The NZ calendar this week is all about the RBNZ. We expect the MPS on Thursday to deliver a 25bp cut to 2.0% and maintain an easing bias (we see almost zero chance it doesn’t cut). This outcome is what most expect and is fully priced. The potential surprises would be a neutral bias, which would boost the NZD; or a strong signal of further easing to 1.75% or lower, which would push the NZD materially lower.

3 months: We target 0.69, based on an assumption the Fed will hike in Dec and the RBNZ will cut in Aug and again in November. 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 0.63.”