NZD/USD levelling out ahead of the RBNZ

• NZD/USD has corrected from fresh highs as markets eye the RBNZ this week.
• The optimism of a fast recovery from the deepest recession in decades has buoyed the bird.

NZD/USD is currently trading at 0.6758 in a quiet start to the week in Asia, oscillating between a low of 0.6752 and 0.6768.

With an upside correction in the greenback, NZD/USD has been scaled back since reaching a new high for the year on Friday at 0.6797.

The northerly trajectory has been mostly down to weakness in the greenback which has otherwise masked the vulnerabilities in the currency pertaining to the deepest recession in decades.

The strict measures in response to the COVID-19 pandemic have led to the country’s Gross Domestic Product shrank by 12.2% between April and June as the lockdown and border closures hit.

However, helping the currency on its way to the new highs last week, Finance Minister Grant Robertson said the GDP numbers were better than expected and suggested a strong recovery ahead.

“Going hard and early means that we can come back faster and stronger,” he said.

There are also predictions of a swift recovery, because of New Zealand’s strong response to the virus from analysts at Westpac

“We expect the June quarter’s record-breaking GDP decline to be followed by a record-breaking rise in the September quarter,” said Westpac’s Senior Economist Michael Gordon.

Eyes on RBNZ

The main focus at this juncture is with the Reserve Bank of New Zealand with the Policy Review scheduled for this Wednesday.

We don’t expect any change on policy, but the tone will be dovish and they may signal an intention to flex the pace of the LSAP more to help flatten the curve, which would take pressure off the NZD,

analysts at ANZ bank wrote. 

NZD/USD levels