NZD/USD was first hit by the Federal Reserve and its hawkishness, and then by the Reserve Bank of New Zealand and its dovish.
The team at BNZ assesses that the RBNZ could give another nudge to the NZD quite soon and explains:
Here is their view, courtesy of eFXnews:
The following is Bank of New Zealand (BNZ) reaction to today’s RBNZ policy decision.
We reiterate that our own interest rate profile remains highly dependent on the NZD falling and falling quite aggressively. We remain of the view that this will be the eventual catalyst for the RBNZ to pull the trigger. Not surprisingly the RBNZ today reiterated the view that it believes the NZD to be “unjustified and unsustainable” and that it is expected to moderate over coming years.
Indeed, with respect to the currency, we wouldn’t be surprised if the RBNZ took the opportunity to give the currency another nudge sometime soon given that the environment is ripe for intervention to be effective given the combination of today’s RBNZ statement and the Fed’s statement, which had already seen the NZD fall over a cent.
The RBNZ has now set itself a very high hurdle indeed before it contemplates raising interest rates again. This means that it will be very much later rather than sooner before it will be convinced to act. And the later it gets the more likely the NZ economy will be well and truly into its expected slowdown phase so the less likely rates will need to be raised at all.
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