24 Jul 2015
Kiwi short-covering should continue - Westpac
FXStreet (Bali) - For the week ahead, the kiwi short-covering should continue, notes Sean Callow, FX Strategist at Westpac, although still calling NZD/USD to head towards 0.62 by end-2015.
Key Quotes
"The kiwi is subject to ongoing pressure from dairy prices, which RBNZ governor Wheeler cited as one reason for the 25bp OCR cut to 3.0%. Moreover, “some further easing seems likely.” Yet NZD/USD bounced and is on track for only its second weekly rise since April."
"This looked to be driven by the fairly muted tone of the statement. The RBNZ softened its rhetoric on the exchange rate. It moved away from the key words “unjustified and unsustainable”, instead opting to say “further depreciation is necessary.”
"The policy bias was also not especially dogmatic and overall the statement gave the impression that there was no consideration of moving things along with a 50bp cut at this meeting."
"Westpac continues to expect rates to be lowered to 2.0% but now expects only 25bp increments throughout the easing cycle."
"This - and our ongoing view that the Fed will hike in Sep (only 40% priced) - should ensure that NZD/USD heads towards 0.62 by end-2015."
"But for the week ahead, the kiwi short-covering should continue, providing a reprieve for an otherwise gloomy outlook for the commodity bloc."
Key Quotes
"The kiwi is subject to ongoing pressure from dairy prices, which RBNZ governor Wheeler cited as one reason for the 25bp OCR cut to 3.0%. Moreover, “some further easing seems likely.” Yet NZD/USD bounced and is on track for only its second weekly rise since April."
"This looked to be driven by the fairly muted tone of the statement. The RBNZ softened its rhetoric on the exchange rate. It moved away from the key words “unjustified and unsustainable”, instead opting to say “further depreciation is necessary.”
"The policy bias was also not especially dogmatic and overall the statement gave the impression that there was no consideration of moving things along with a 50bp cut at this meeting."
"Westpac continues to expect rates to be lowered to 2.0% but now expects only 25bp increments throughout the easing cycle."
"This - and our ongoing view that the Fed will hike in Sep (only 40% priced) - should ensure that NZD/USD heads towards 0.62 by end-2015."
"But for the week ahead, the kiwi short-covering should continue, providing a reprieve for an otherwise gloomy outlook for the commodity bloc."