NZD/USD: Nearing a potential trough – BNZ
|According to the NAB FX Strategy Team, the New Zealand Dollar’s downturn might be drawing to a close. Their three to six month target for the NZD/USD pair is at 0.6150.
Key Quotes:
“The NZD inevitably performs poorly during economic downturns and global economic momentum remains to the downside. Easier global monetary policy currently underway and a trade war truce might be enough to stabilise growth and even engineer a modest recovery, which explains our more positive NZD outlook for next year. Despite the soft global backdrop, NZ commodity prices are holding up well and are NZD-supportive.”
“Domestic factors remain largely NZD-negative, with low levels of confidence widely evident and GDP growth on a weaker, sub-trend path. Further RBNZ rate cuts look inevitable, although these are well-priced.”
“Our 3-6 month target for the NZD remains at 0.6150, with two-sided risks, mainly emanating from the global economic outlook. If economic growth momentum remains to the downside and the trade war re-escalates then that would raise the chance of a sub-0.60 handle for the NZD seen typically under global recession-like conditions. On the positive side, more encouraging developments in the trade war and a turnaround in global growth would inject some life into the NZD and at the same time trigger a broadly-based reversal in the USD, adding to potential NZD/USD gains.”
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