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15 Jul 2013
Flash: Additional falls in NZD/USD viewed as unlikely – BNZ
FXstreet.com (New York) - According to Analyst Mike Jones at BNZ, “We remain of the view that additional steep falls in the NZD/USD are unlikely, with the currency more likely to spend the remainder of the year in a sideways, to slightly higher, range.”
For this week, Q2 CPI is the most notable piece of local event risk facing the currency. Another weak inflation number is expected (BNZ and market both 0.3% QoQ, 0.8% YoY). Confirmation of another CPI print below the RBNZ’s 1-3% target band may encourage OIS markets to trim the 50bps worth of hikes now priced into the curve, weighing on the NZD.
Moreover, “stubbornly strong commodity prices remain a fundamental support for the NZD, particularly against the AUD. While we have been expecting some easing in prices, ongoing supply tightness in soft commodity markets (dairy, kiwifruit, meat) mean we may have to upgrade our view before long. Wednesday morning’s GDT dairy auction will be a key test of this.” Jones adds.
For this week, Q2 CPI is the most notable piece of local event risk facing the currency. Another weak inflation number is expected (BNZ and market both 0.3% QoQ, 0.8% YoY). Confirmation of another CPI print below the RBNZ’s 1-3% target band may encourage OIS markets to trim the 50bps worth of hikes now priced into the curve, weighing on the NZD.
Moreover, “stubbornly strong commodity prices remain a fundamental support for the NZD, particularly against the AUD. While we have been expecting some easing in prices, ongoing supply tightness in soft commodity markets (dairy, kiwifruit, meat) mean we may have to upgrade our view before long. Wednesday morning’s GDT dairy auction will be a key test of this.” Jones adds.