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NZD/USD continues to survive tests of the bottom of the range in the low 0.71s. According to economists at Westpac, kiwi’s current consolidation phase is set to eventually give way to gains above 0.7300. What’s more, the Budget was neutral for the NZD, while next week’s RBNZ MPS could be supportive.

There is a risk of a less dovish assessment of the economy and outlook

“We expect a break of the top at 0.7300 during the next week or two, which will then signal a multi-month move towards 0.7600.”  

“Today’s Budget disappointed our expectations: a modestly improved set of fiscal metrics, only slightly less borrowing, and an unchanged fiscal impulse. The latter will have a negligible impact on RBNZ’s monetary policy.”

“Next week’s RBNZ MPS is likely to extend the ‘long time on hold’ theme, with all settings (OCR, FLP, LSAP) unchanged. That said, we see risks of a surprise as skewed to a hawkish one. Economic developments since the February MPS have been moderately net-positive (employment, commodities, business confidence, housing), which means the unconstrained OCR track could be increased. We see this event as potentially NZD-positive.”

 

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