11 Jan 2016
NZD/USD: What the future holds in store? - Westpac
FXStreet (Delhi) – Imre Speizer, Senior Market Strategist at Westpac, presents their NZ FX outlook for 2016, taking a medium term look.
Key Quotes
“1 week: The recent slide should continue during the week ahead, our near term target 0.6430 - the November low. Commodity currencies (and commodities) are under pressure again, thanks to a bout of risk aversion since the beginning of 2016 which has seen the likes of the Chinese stock market and Mexican and South African currencies plunge (to record lows for MXN and ZAR).
The NZ data calendar is unlikely to ruffle markest too much, but the Us calendar contains retail sales, industrial production, and more, plus plenty of Fedspeak to decipher for monetary policy clues.
3 months: We expect NZD/USD to remain under downward pressure during the next few months, targeting sub-0.64. Our main argument is that the Fed should raise US interest rates further this year but markets have priced little in. The labour market is looking strong and that should eventually result in wage inflation, in turn causing the Fed to tighten. After starting the tightening cycle in December, it could follow up in March, taking the policy rate to 0.625%.
In contrast, the RBNZ should remain on hold at 2.5%, but with downside risks.
1 year: Our 1 year ahead forecast is 0.62, based partly on the OCR being cut by another 50bp to 2.0%, but the Fed rate to rise by 100bp to 1.375%.”
Key Quotes
“1 week: The recent slide should continue during the week ahead, our near term target 0.6430 - the November low. Commodity currencies (and commodities) are under pressure again, thanks to a bout of risk aversion since the beginning of 2016 which has seen the likes of the Chinese stock market and Mexican and South African currencies plunge (to record lows for MXN and ZAR).
The NZ data calendar is unlikely to ruffle markest too much, but the Us calendar contains retail sales, industrial production, and more, plus plenty of Fedspeak to decipher for monetary policy clues.
3 months: We expect NZD/USD to remain under downward pressure during the next few months, targeting sub-0.64. Our main argument is that the Fed should raise US interest rates further this year but markets have priced little in. The labour market is looking strong and that should eventually result in wage inflation, in turn causing the Fed to tighten. After starting the tightening cycle in December, it could follow up in March, taking the policy rate to 0.625%.
In contrast, the RBNZ should remain on hold at 2.5%, but with downside risks.
1 year: Our 1 year ahead forecast is 0.62, based partly on the OCR being cut by another 50bp to 2.0%, but the Fed rate to rise by 100bp to 1.375%.”