NZD/USD: Further downside pressure seen ahead – Rabobank

According to Jane Foley, Senior FX Strategist at Raobank, the NZD/USD pair will continue to face bearish pressure over the coming months. They forecast the pair at 0.63 in 12 months.  

Key Quotes:  

“Since its lows on Friday NZD/USD has managed to claw back around 1.4%. Some of the short-covering has likely been encouraged by the better tone of the AUD which in recent sessions has been lifted by strength in the price of iron ore.  A better tone in Asian stocks overnight also contributed.  That said, given the pressure of trade wars and slowing growth in China, we expect further downside pressure on the NZD/USD in the coming months.  We continue to forecast a move to 0.63 on a 12 mth view.”

“A key event on New Zealand’s economic calendar is next week’s RBNZ’s policy announcement and Monetary Policy Statement. There is no expectation of a change of policy from the central bank.  However, there is some speculation in the market that the central bank may revise higher its inflation forecast.”

“The government action’s on foreign ownership of property and its right to screen overseas investment in significant business assets, sensitive land (including farmland), and fishing quota may signal a less open economy. That said, in a contrasting move New Zealand last week also ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.  This signalled strong and continued support for the broad multinational agreement which was snubbed by the US when President Trump took office. The agreement will come into force when at least half of the participating countries have ratified it, which will likely be early next year. According to independent forecasters commissioned by the Ministry of Foreign Affairs and Trade, once CPTPP is fully implemented, New Zealand’s annual GDP would be between NZ$1.2 and NZ$4.0 billion more than it would have been, if there was no agreement.  This is thus a bullish longer term factor for the NZD.”