The recent USD strength on Clarida and Daly’s shift, also in line with decent data, has kept the USD bid and that has helped weaken the NZDUSD. The short end of the US yield curve has been surging.
On top of this the RBNZ met this week and took what is being billed as a ‘dovish twist’ as they pulled back from a 50bps hike. The actual detail of the RBNZ rate meeting was far more bullish than many are recognising. The NZD offers value for the medium term with a series of interest rate hikes planned.
The RBNZ see the official cash rate at 0.94% in March 2022 (vs 0.86% previously, 2.14% in December 2022(1.62%), and 2.30% in March 2023 (previously 1.77%). That’s the positive news. They see their TWI moving higher, employment improving, GDP rising and have brought forward the 2.1% rate from 2024 to 2023 and added 50bps on top to make it 2.6%. Left hand side below is the previous RBNZ projections. Right hand side is the projections from this week. Big shift!
Can’t see this NZD weakness continuing and NZDJPY looks very good value too. The ‘no-brainer’ play would be if we see the Fed pushing back on faster taper expectations. That would open up a great NZDUSD buy.