NZ: Domestic economic picture likely to weigh on the NZD - ANZ
According to analysts at ANZ, the New Zealand’s domestic economic picture is expected to continue to be a factor weighing on the NZD.
Key Quotes
“While the NZD is now below our fair value range, this estimate will not completely account for the shift in New Zealand’s whole yield structure recently.”
“That backdrop is further reinforced by ANZ now no longer expecting the next move from the RBNZ to necessarily be a hike. In fact, we see a non-trivial chance of a cut.”
“Admittedly, the near-term picture is clouded by a USD that is beginning to look fully priced relative to fundamentals.”
“The US economy is no longer outperforming to the same degree and the Fed’s tightening cycle is more mature. That could limit NZD downside in the near-term (together with a lack of catalysts for the market to push for RBNZ cuts). However, we suspect markets will remain choppy rather than trending, particularly with lingering questions over the broader global growth picture.”
“Beyond this, our overarching views regarding the currency landscape are unchanged. We continue to believe that as the global liquidity cycle tightens, together with global growth slowing to trend (if not below) that we are set to enter a period of higher volatility, effectively spelling the end to the global risk appetite cycle, and that this will ultimately drive a negative backdrop for cyclical currencies (like the NZD).”
“As such, we continue to believe that further NZD underperformance on a TWI basis is likely.”
“While we see NZD/AUD in a broad range, we believe it is near the top of that range and should strengthen modestly from current levels.”
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