NZDUSD headed further north to beyond 0.7300 – Westpac

Imre Speizer, Research Analyst at Westpac, suggests that Friday’s disappointing US GDP data will probably give an already reluctant Fed another reason to proceed cautiously with its intended tightening cycle.

Key Quotes

“That should keep the US dollar under downward pressure this week, and boost NZD/USD further to beyond 0.7300.

“The NZ data calendar this week contains two events of importance for markets. The RBNZ inflation expectations survey (Tue) has downside risks in our opinion, given the survey was conducted very soon after the disappointing Q2 CPI release. The GDT dairy auction on Tue night is currently predicted by futures markets to show a decent 8-10% bounce in WMP prices, which if proven correct, will surely give the NZD a push higher. There’s also a housing market update from QV (Tue) and minor labour data (Wed; the main release will be in two weeks time).

3 months: We target 0.69, based on an assumption the Fed will hike in Dec and the RBNZ will cut in Aug and possibly again in 2016. However the persistent backdrop of global demand for high-yielding currencies is strong - if the Fed doesn’t hike, then 0.75+ is likely.

1 year: Our economic fundamentals based forecast is 0.63.”