NZD/USD: Expect it to trade below 0.7050 this week - Westpac

Imre Speizer, Senior Market Strategist at Westpac, notes that the NZD fell around 3 cents on Friday, as the UK referendum results unfolded, to just under 0.7000.

Key Quotes

“We see scope for this reaction to extend further during the weeks ahead if the UK’s exit is perceived as increasing the chances of other countries also leaving the EU. We expect it to trade below 0.7050 this week, paving the way for a move to the high 0.60s.

The NZ and US data calendars will probably be relegated in market importance this week in favour of geopolitics. The ANZ business confidence survey (Thu) does contain inflation expectation components, and will be worth watching. Otherwise, there’s the May trade balance (Mon) and building permits (Thu). US data flow picks up pace with a bunch of PMIs including the Richmond, Markit, Chicago and ISM surveys, plus Conference Board consumer confidence, pending sales and the final estimate of Q3 GDP. The Empire and Philly surveys flag upside risk to PMIs.

3 months: We target 0.65, based on a stronger US dollar and the RBNZ cutting to 2.0%. If the Fed doesn’t tighten this year, but Brexit contagion risks increase, the US dollar should strengthen for safe-haven reasons.

1 year: Our economic fundamentals based forecast is 0.62.”