NZD/USD: Kiwi to outperform, RBNZ could validate hawkish expectations – CIBC


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The Reserve Bank of New Zealand could validate hawkish expectations that should support the NZD/USD pair, according to analysts at CIBC. They see the pair at 0.72 during the third quarter and at 0.73 by the first one of 2022. 

Key Quotes: 

“Amidst the global move to re-price the removal of ultraaccommodative policy, the market has recently shifted to a call for the first RBNZ hike to be delivered in November this year. The RBNZ had already made a hawkish turn at the May meeting, suggesting a hike in 2H 2022. Upon that announcement the NZD/USD traded above 0.7300, but has tracked lower since, driven primarily by repricing of Fed expectations.”

“Support for NZD/USD is now apparent in the mid-0.6900 range, and should the RBNZ validate the hawkishness of market pricing at their meeting on July 14th, we expect to see NZD/USD regaining ground, potentially toward 0.7200.”

“The recovery in the domestic economy continues at a robust pace. Though long positioning that was unwound as part of the recent retrace, suggests that was already in the price.”

“We anticipate NZD outperformance on widening interest rate differentials vs both EUR and AUD.”
 

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