4 Mar 2016
NZD/USD: After range bound trading, eventual break will be downwards - Westpac
Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD remains stuck in a month-old range of 0.6550-0.6750, but we expect the eventual break will be downwards.
Key Quotes
“The RBNZ this week will be pivotal: if it cuts, the NZD will test the range downside, while a missive similar to the Feb speech will see NZD shorts exiting in disappointment. An easing signal would probably cause only a minor selloff on the day, but NZD/USD would then be vulnerable to further US dollar strength. We target 0.6200 multi-month.
Event risk: Next Thursday’s RBNZ MPS will have traders on edge. Although markets have priced only a 20% chance of a rate cut, there is scope for the Governor to surprise the NZD, particularly given the sum of changes in the economy since the Dec MPS argues for an OCR 50bp lower. Markets have been reluctant to price in more easing because the Governor’s Feb speech poured cold water on the prospect of imminent easing, citing housing and “anchored” inflation expectations. Data releases include Q4 manufacturing (Tue), electronic spending (Wed), and manufacturing PMI and food prices (Fri).”
Key Quotes
“The RBNZ this week will be pivotal: if it cuts, the NZD will test the range downside, while a missive similar to the Feb speech will see NZD shorts exiting in disappointment. An easing signal would probably cause only a minor selloff on the day, but NZD/USD would then be vulnerable to further US dollar strength. We target 0.6200 multi-month.
Event risk: Next Thursday’s RBNZ MPS will have traders on edge. Although markets have priced only a 20% chance of a rate cut, there is scope for the Governor to surprise the NZD, particularly given the sum of changes in the economy since the Dec MPS argues for an OCR 50bp lower. Markets have been reluctant to price in more easing because the Governor’s Feb speech poured cold water on the prospect of imminent easing, citing housing and “anchored” inflation expectations. Data releases include Q4 manufacturing (Tue), electronic spending (Wed), and manufacturing PMI and food prices (Fri).”