NZD/USD to target 0.67, based on a stronger US dollar - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that a concentrated series of events (mostly RBNZ-related) has stung NZD bulls.

Key Quotes

“The RBNZ announced, and then delivered, an interim economic assessment which “corrected” false market impressions that the RBNZ was reluctant to cut, signalling a move in August. It also announced new housing loan restrictions, and to top it all off Q2 CPI was lower than expected. A stronger US dollar has also helped, such that a sticky 0.7000 is vulnerable to eventually breaking down.

The NZ data calendar this week is unlikely to disturb the NZD too much. There’s the trade balance (Tue), building permits (Fri) and ANZ business confidence (Fri). The US calendar will be more important, including FOMC, advance Q2 GDP and ECI, and durable goods orders. The Fed is unlikely to explicitly signal that Sep is live but they are sure to sound less rather than more dovish.

3 months: We target 0.67, based on a stronger US dollar and the RBNZ cutting to 2.0% (with downside risks beyond that). Even if the Fed doesn’t tighten this year, Brexit contagion and more general global risks can support the US dollar for safe-haven reasons.

1 year: Our economic fundamentals based forecast is 0.63.”