NZD/USD: Scope for weakness – Lloyds Bank

Analysts at Lloyds Bank see scope for NZD/USD weakness, forecasting 0.67 by year end and 0.65 by end-2018.

Key Quotes

 “Despite the general USD weakness in the aftermath of the so-called ‘dovish’ hike from the FOMC in March and US President Trump’s failure to pass the Healthcare Bill, the New Zealand dollar remained under pressure against the US dollar, moving towards the lower bound of its recent range, around 0.69. This can largely be attributed to a downturn in domestic data. GDP growth for Q4 2016 disappointed at 2.7%y/y and February’s trade balance showed a small deficit relative to an expected surplus.”

“At its March meeting, the Reserve Bank of New Zealand left interest rates at 1.75%. Governor Wheeler adopted a relatively ‘dovish’ tone, suggesting monetary policy will remain accommodative for a “considerable period”. Moreover, the price of milk – a key export for New Zealand – has dropped sharply from its peak in December.”

“Given the slight deterioration in the fundamental backdrop and the RBNZ’s associated position on monetary policy, we see scope for NZD/USD weakness, forecasting 0.67 by year end and 0.65 by end-2018.