NZD/USD enjoying a free flight while it can ahead of RBNZ hurdles

NZD/USD is trading at 0.6687 following a 0.6% gain into the end of the US session and FX day as the greenback struggles to sustain a bid, expiring its shelflife on the 93 handle in the DXY.

The USD rebound continues to falter as risk assets gain more ground, but price action in the immediate future depends on how US jobs data tonight prints, with plenty expecting a decent print after Trump’s tweet earlier in the week,

analysts at ANZ Bank explained.

The greenback is giving the bird a free flight at the moment, but there could be domestic turbulence ahead. 

First of all, however, markets are looking to the next key catalysts in the next US jobs market data.

US data ahead of NFP Friday

It’s a big one tonight in the US session with US Nonfarm Payrolls and there is more on this here: Nonfarm Payrolls Preview: Hints point to an awful July

Meanwhile, US initial jobless claims were better than expected at 1186k in the week to 1 August vs 1435k the prior week. Continuing claims also fell from 16.951m to 16.107m.

That’s the best data in a few weeks, but as it came after the non-farm payrolls survey week, it hasn’t influenced expectations for tomorrow’s report, which now sit at +1490k.,

the analysts at ANZ forecasted.

Fiscal hawks will be watching to see, however, if there is a correlation between falling initial claims and the end of the USD600/week supplementary benefit payment

RBNZ in focus

Meanwhile, domestically, markets are getting set for the MPS. The Reserve Bank of New Zealand will aim to keep the stance of monetary policy unchanged at next week’s MPS.

Westpac analysts predict the following

• The OCR will remain at 0.25%, and the RBNZ will commit to keeping it there until at least March 2021.

• The RBNZ may keep the LSAP at $60bn to May 2021, without any guidance on what will happen beyond then.

• An equivalent alternative would be to extend the LSAP to August 2021 and lift the cap to $70bn.

• We expect that the LSAP will last for two years and will eventually total $90bn (previously $100bn).

• We expect that the OCR will fall to -0.5% in April next year, because there is a need for more monetary stimulus than the LSAP alone can provide.

The analysts at ANZ  maintain that it’ll be very dovish…

not just the overall tone, but also in terms of keeping negative rates and foreign asset purchases on the table, all of which speaks to strong headwinds for the NZD.  

NZD/USD levels