News & Analysis at your fingertips.

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. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Wall Street
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
More View more
Real Time News
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/v6RGICQvge
  • Get your snapshot update of the of top level exchanges and key index performance from around the globe here: https://t.co/d8Re5anlG5 https://t.co/rws9LHJV3E
  • RT @FxWestwater: Japanese Yen Forecast: JPY Crosses Eye BoJ, CPI as Haven Flows Bolster Yen Strength Link: https://www.dailyfx.com/forex/fundamental/forecast/weekly/jpy/2021/09/18/Japanese-Yen-Forecast-JPY-Crosses-Eye-BoJ-CPI-as-Haven-Flows-Bolster-Yen-Strength.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https:/…
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/FVisZuTP6M
  • Stocks appear to be in a corrective phase but could get put to the test; levels and lines to watch in the days ahead. Get your weekly equities forecast from @PaulRobinsonFX here: https://t.co/H1BaTlIHjY https://t.co/zP3mjfslSD
  • Currency exchange rates are impacted by several factors. Are different world leaders a contributing factor? Find out here: https://t.co/4jsORznRTE https://t.co/Of1thU4zXw
  • Further your forex knowledge and gain insights from our expert analysts on AUD with our free guide, available today: https://t.co/p2FhEwym1E https://t.co/MjiYB85TSF
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/fIO9TP7D62
  • Trading Forex is not a shortcut to instant wealth, excessive leverage can magnify losses, and sentiment is a powerful indicator. Learn about these principles in depth here: https://t.co/lZFM8youtX https://t.co/Xja8DHUqlH
  • Risk management is one of the most important aspects of successful trading, but is often overlooked. What are some basic principles or risk management? Find out from @PaulRobinsonFX here: https://t.co/IsnpfJhp91 https://t.co/9po5Lg4vnR
New Zealand Dollar Forecast: Trading the RBNZ Next Week

New Zealand Dollar Forecast: Trading the RBNZ Next Week

Justin McQueen, Strategist

NZD, AUD/NZD Price Analysis & News

  • NZ Economy Performs Better than RBNZ Assumes
  • NZD Strength Remains a Concern for RBNZ
  • AUD/NZD the Preferred Play for RBNZ Meeting

NZ Economy Performs Better than RBNZ Assumes

Next week will see the RBNZ deliver its first monetary policy announcement of the year, where expectations are for the central bank to stand pat on current monetary policy. However, in light of the recent run of stronger than expected economic data, the focus will be on the RBNZ’s updated forecasts as well as Governor Or’s presser.

At the last meeting, the RBNZ provided a hawkish surprise given that the NZ economy had performed significantly better than the central bank’s pessimistic forecasts, which in turn saw a sharp re-pricing of negative rates in the front end of the curve and subsequently prompted a sizeable bid in the Kiwi. Since the November meeting, it appears as if the RBNZ has once again underestimated the recovery in the NZ economy as domestic data has outperformed the RBNZ’s forecasts. Q4 CPI printed 0.3ppts higher than the RBNZ had assumed at 0.5% Q/Q and 1.4% Y/Y, the bounce back in Q3 growth had been firmer than expected at 14% (vs 13.4%) and the unemployment rate saw a sizeable drop to 4.9%, which had been 0.7ppts below the RBNZ’s estimate.

New Zealand Dollar Forecast: Trading the RBNZ Next Week

Source: DailyFX

Not only that, but the global economy also looks to be in better shape with vaccine programs underway, while a democratic sweep has raised the prospect of a larger US fiscal stimulus package. In turn, the central bank will likely acknowledge this growth outperformance and thus forecast a quicker return to pre-COVID levels than previously expected, subsequently, reducing the need for further monetary stimulus.

NZD Strength Remains a Concern for RBNZ

However, a cause of concern for the RBNZ’s inflation outlook will be the Kiwi’s strength on a trade-weighted basis, which currently hovers at multi-year highs at 74.55, and is notably higher than the RBNZ’s forecast of 71.5. In turn, risks remain for RBNZ jawboning, which could come in the form of extending LSAPs beyond Mid-2022, much like the RBA. That said, while this would place initial pressure on the Kiwi, downside would likely be short-lived.

New Zealand Dollar Forecast: Trading the RBNZ Next Week

Overall, the outlook remains positive for the NZD, which continues to ride the reflation theme, this also looks to be reflected in positioning data as speculators remain long NZD. However, this could suggest that upside against the USD in the short run could be somewhat limited, given that a lot of good news has been priced in.

New Zealand Dollar Forecast: Trading the RBNZ Next Week

AUD/NZD the Preferred Play for RBNZ Meeting

In turn, my focus is on AUD/NZD, which has bounced back to 1.08 despite the RBA’s best efforts to keep pressure on the Aussie. The cross currently trades at rich levels relative to spreads and while the RBNZ has the proclivity to surprise, it is unlikely that the RBNZ will match the dovish stance of the RBA. Another factor that has also garnered attention in recent sessions is US-Sino tensions resurfacing, in which AUD has a higher beta relative to NZD. With that in mind, I would prefer to fade the strength in AUD/NZD from 1.08, looking for a move back to 1.06.

AUD/NZD vs 10yr Spreads

New Zealand Dollar Forecast: Trading the RBNZ Next Week

Source: Refinitiv

Hawkish vs Dovish: How Monetary Policy Affects FX Trading

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

DISCLOSURES