More specifically, “in the immediate wake of the NZ GDP report this week, the odds of a rate cut over the coming 12 months were trimmed to roughly 40%, launching the currency higher.” Jones adds. In fact, the NZD has been the strongest performing currency over the past 24 hours. After spiking to almost 0.8300 yesterday, the NZD/USD managed to hold on to most of these gains overnight, despite a resurfacing of global growth concerns.
Notably, our risk appetite index (scale 0-100%) has cooled from 77.5% to 76.1% this week, as investors have reassessed the likely success of QE3 and the tone of global data has remained lackluster. While this has eroded support for ‘risk-sensitive’ currencies like the NZD/USD, the kiwi continues to draw support from the fact the NZ economy remains in better shape than most. “We believe positive relative growth and interest rate differentials will support the NZD through to mid 2013 – our end-2012 NZD/USD forecast is still 0.8200.” he notes.