We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • Why do you require consistency in trading and why does it matter? Find out: https://t.co/f4y1FOOZnM #tradingstyle https://t.co/x5HgYopWc5
  • The USD may rise if the FOMC re-affirms its data-dependent approach and cools 2020 rate cut bets. US retail sales and CPI data may also give the Fed impetus to hold rates. Get your $USD market update from @ZabelinDimitri here: https://t.co/XnDITaDOox https://t.co/A480uVMqF2
  • What tools does the ECB have left to stimulate the Eurozone? Where is the #Euro heading? Find out from Chief Eurozone Economist at Pantheon Macroeconomics Claus Vistesen only on Trading Global Markets Decoded #podcast hosted by @MartinSEssex here:https://t.co/Twr44cZ1GB https://t.co/DXlDH5Cp9e
  • The price of oil extends the advance from the October low as #OPEC and its allies pledge to take additional steps to balance the energy market. Get your crude #oil market update from @DavidJSong here: https://t.co/llGq8yPFH4 #OOTT https://t.co/1OCVOIrK98
  • Gold closed lower after paring early-week gains post-NFP on Friday. But will price finally break support? These are levels that matter on the XAU/USD weekly chart. Get your gold technical analysis from @MBForex here: https://t.co/ovGheRg4MQ https://t.co/ZEQSYktj0w
  • What is your #tradingstyle? Take the quiz and let us know: https://t.co/LPBOcS0Vtd https://t.co/l6FvtcADEH
  • Asia’s vast and growing importance to the world economy is not yet matched by the presence of a currency trading center to rival the established order. Get your update on market drivers in Asia from @DavidCottleFX here: https://t.co/E2hqoRdO7q https://t.co/dnrAMFK4U2
  • Geopolitical developments send #oil prices soaring or falling. Get your market update from @MartinSEssex here:https://t.co/XVXLyG8vjq #OOTT https://t.co/RMk5Eb5fLU
  • Negative yielding government bonds – What are they telling us? Find out from @nickcawley1 here: https://t.co/F6JuhmrvPT https://t.co/KdpSjQSJ8F
  • #Euro area stocks may be preparing to break the four-month uptrend built around hopes for a US-China trade deal and an orderly #Brexit outcome. Get your market update from @IlyaSpivak here: https://t.co/ujlCJiXLvh https://t.co/INdFtsrTTF
NZD/USD Vulnerable to US Tariffs & Trade War Fears, BoC Hike Bets

NZD/USD Vulnerable to US Tariffs & Trade War Fears, BoC Hike Bets

2018-08-31 22:00:00
Daniel Dubrovsky, Analyst
Share:
Please add a description for the image.

New Zealand Dollar Fundamental Forecast: Bearish

NZDFundamental Outlook – NZD/USD, RBNZ, Trade Wars, US Tariffs, BoC, Fed, Stocks

  • New Zealand Dollar prices fell on business confidence news, RBNZ rate cut bets increased
  • $200b US tariffs on China that risks sending the S&P 500 lower also bodes ill for the NZD
  • Bank of Canada may amp up markets for October rate hike, leaving Kiwi Dollar vulnerable

Have a question about what’s in store for New Zealand Dollar next week? Join a DailyFX Trading Q&A Webinarto ask it live!

New Zealand Dollar prices succumbed to selling pressure towards the end of last week. Ten-year low New Zealand business confidence sent front-end local bond yields tumbling, implying rising RBNZ dovish monetary policy expectations. In fact, overnight index swaps are now pricing in about a 35% chance that the central bank will now cut rates as soon as February 2019.

Unlike the Reserve Bank of Australia(which leans towards a hike in the long run), the RBNZ offers a balanced view of where interest rates could go. This places the focus for where NZD prices may go on local economic data. As far as next week is concerned, prominent domestic event risk is notably lacking. There may be some weakness on terms of trade data if it disappoints.

Rather than statistics, the pro-risk New Zealand Dollar will arguably focus on how markets will be impacted by sentiment. Last week, rising trade war fears and emerging market concerns also weighed on Kiwi Dollar prices. The former was inspired by Donald Trump’s displeasure with North Korean denuclearization progress, accusing China of holding it back.

As for the latter, the Trump Administration threatened to impose an additional $200b in Chinese import tariffs as early as next week. If he follows through, China seems likely to retaliate. This would increase trade war concerns, likely denting stocks and the pro-risk New Zealand Dollar. If the US Dollar gains on haven bids, this could also pressure the HKMA to defend their currency peg again and equities could weaken.

The New Zealand Dollar may also be vulnerable to the Bank of Canada policy announcement. The central bank is one rate hike away from tying the RBNZ’s OCR. Unlike the RBNZ, markets are pricing in a better-than-even chance (~70%) of a BoC hike in October. Canada is expected to hold rates unchanged in September, but it may signal its intension to act soon. This would bring the Canadian Dollar closer to overtaking NZD in terms of yield, leaving the latter at risk.

Finally, the markets are still underpricing the probability of an additional Fed rate hike by the end of this year. Expectations that slowly align with the central bank’s outlook would bode well for US Dollar prices. This could occur on next week’s US jobs report. A combination of vulnerabilities that leave the New Zealand Dollar at risk from sentiment and monetary policy fundamentals prolongs the bearish outlook.

Check out our 3Q forecasts for the US Dollar and Equities in the DailyFX Trading Guides page

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.