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The dent from Wednesday’s US CPI surprise should be repaired soon, allowing the rally to extend beyond 0.7300. Meanwhile, the Budget should be both rosy and stimulatory, according to economists at Westpac.

The recent decline should slow as major support at 0.7100 nears

“NZD/USD has been dented by yesterday’s US CPI surprise, but as long as 0.7100 holds, we will remain bullish, targeting 0.7500 multi-month.”  

“The Budget will show a dramatic improvement in NZ’s fiscal position compared to the Half-Year Update. Essentially, the covid hit to the Government’s books has been significantly less than anyone feared.”  

“Tax revenue and the operating balance tracks will show large upward revisions, and with a sharply lower debt track, Treasury will pare back bond issuance plans. While banking some of this upside surprise, the Government has also indicated that it will dial up its spending and investment plans, thereby maintaining its stimulatory settings.”

 

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