Analysts at Deutsche Bank, forecast NZD/USD at 0.69 by mid-2019 and around 0.66 by the end of the year. They point out the Kiwi is the most expensive G10 currency.
Key Quotes:
“NZD has defied the bears (including ourselves since mid-2018) for some time, and with a lack of obvious negative catalysts we’ve lifted our previously downbeat forecasts. Almost every data release tells the same story – slower growth than in the exceptional 2014-2017 period, but still a healthy pace. And a few developments in recent months have been positive: dairy prices are up 20% from the 2018 slump; the RBNZ hasn’t followed the dovish tilt of peers; the slowdown in migration is showing tentative signs of slowing. On top of that, inflation is basically at target (1.9%, vs mid-point of target range of 2%) – there aren’t many countries that can say that. But the RBNZ could still tilt dovish – AUD/NZD around current levels may concern them a little. And there’s still no wage growth uplift to speak of, unlike in other Anglo countries.”
“Most importantly for our longterm forecasts, NZD just looks too high. It’s the most expensive in G10 across a broad range of metrics (PPP, DBeer etc). And it looks expensive vs a range of simple charts – against rate differentials, commodities and consumer sentiment for example.”
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