NZD/USD: Scope to slide below 0.70 towards the 0.6945 mark – Westpac

FOMC’s hawkish shift is set to dominate the strong NZ GDP data near-term. Economists at Westpac target NZD/USD at 0.7000 next week, with potential to 0.6945.

NZ GDP rose more than expected in Q1

“We are bearish for the week ahead. The next downside target is 0.7000, and below that (and more important) is 0.6945 – the major low formed in late March.”

“The NZ Q1 GDP report was much stronger than the market had expected, at +1.6% QoQ vs +0.5% QoQ (even if some of the surprise is probably transitory), and much stronger than the -0.6% contraction the RBNZ had forecast. It supports the RBNZ’s more hawkish stance.” 

“Medium-term, we have been forecasting 0.75 by year end. Among the main drivers, the NZ commodity price outlook remains supportive, and as should NZ-US yield spreads. The greater uncertainty will be regarding the medium-term outlook for risky assets and the US dollar.”