NZD/USD: RBNZ takes a more neutral tone – Danske Bank

Minna Kuusisto, Analyst at Danske Bank, notes that the depreciation of the USD ahead of the U.S. presidential elections supported the NZD until the actual election day when NZD/USD reached a two-month high of 0.74.

Key Quotes

“In the aftermath of the US election, abroad-based strengthening of the USD brought the NZD back to the 0.72 level. The earthquake in mid-November added to NZD weakness and pushed the pair below 0.71. As NZD/USD is currently oversold, we expect to see a moderate rebound back to the 0.72 level.”

“In the longer term, we expect NZD/USD to continue its gradual drift lower as the monetary policy paths of the RBNZ and Fed diverge: RBNZ keeps its cautious ready-to-act tone while the Fed might have to rethink its policy to respond to the impact of a more expansionary fiscal policy in the Trump era. Even though the Fed did not change its plan of hiking gradually, markets are prone to play with the possibility. We leave our forecast unchanged.”