NZD/USD: Bullish trend to continue in spite of RBNZ pushback – MUFG

The NZD/USD pair is seen moving to the upside over the next months according to analysts at MUFG Bank. They forecast the pair will end the first quarter around 0.7400 and the second at 0.7500. 

Key Quotes:

“The New Zealand dollar has risen to fresh highs against the US dollar supported by building global recovery optimism. It has helped to lift Bloomberg’s commodity price index to its highest level since October 2018. It should be no surprise then that commodity-related G10 currencies have outperformed so far this year.”

“New Zealand has been one of the global success stories in combating COVID which has limited the negative economic impact. New Zealand’s economy is experiencing more of a “v” like recovery.”

“The strength of the recovery has prompted the RBNZ to drop its easing bias. At the same time though the RBNZ continues to emphasize that it does not plan to raise rates until at least 2023 given the output gap is not expected to close until 2H 2022. The kiwi would likely strengthen more sharply if the RBNZ raised rates well ahead of other major central banks. Low rates for longer is creating financial stability risks. House prices have risen sharply prompting the RBNZ to tighten lending standards to combat overheating risks in the housing market.”

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