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31 Mar 2015
NZD/USD might end 2015 at 0.68 – BAML
FXStreet (Barcelona) - Yang Chen, Rates Strategist at BofA-Merrill Lynch, explains that NZD strength might lead the RBNZ to shift to an easing bias, and further expects AUD/NZD to remain range-bound in the near term and NZD/USD to end the year at 0.68.
Key Quotes
“The RBNZ’s neutral stance at its March monetary policy meeting (RBNZ on hold with a gradual evolution policy,12 March), together with a relatively dovish Fed, make the NZD one of the two major currencies globally that appreciated the USD over the past month (the other being the CNY). This sent the trade weighted index to the upper bound of the 75-80 range it remained since Aug 2014.”
“There remains a risk of the RBNZ shifting to an easing bias if the NZD remains strong, in our view. In the March MPS, the RBNZ switched to a flat 90d bill forecast, as opposed to gradually higher rates, which is a big change.”
“The RBNZ has lowered its 1Q15 inflation forecast to 0%, and the key is whether current low inflation will pass on to the inflation expectations. Hence, the 1Q CPI inflation figure (on 20 April) and OCR meeting (on 30 April) will be critical for the evolution of NZD/USD going forward.”
“We retain our forecast for the NZD/USD at 0.68 by the end of the year.”
“AUD/NZD looks undervalued relative to their respective economic surprise index, but the pair will likely trade range bound for now with a neutral RBNZ and lack of data prior to late April.”
“The risk to our view is an aggressive easing from the PBoC, especially in the housing market, which should benefit AUD more than the NZD.”
Key Quotes
“The RBNZ’s neutral stance at its March monetary policy meeting (RBNZ on hold with a gradual evolution policy,12 March), together with a relatively dovish Fed, make the NZD one of the two major currencies globally that appreciated the USD over the past month (the other being the CNY). This sent the trade weighted index to the upper bound of the 75-80 range it remained since Aug 2014.”
“There remains a risk of the RBNZ shifting to an easing bias if the NZD remains strong, in our view. In the March MPS, the RBNZ switched to a flat 90d bill forecast, as opposed to gradually higher rates, which is a big change.”
“The RBNZ has lowered its 1Q15 inflation forecast to 0%, and the key is whether current low inflation will pass on to the inflation expectations. Hence, the 1Q CPI inflation figure (on 20 April) and OCR meeting (on 30 April) will be critical for the evolution of NZD/USD going forward.”
“We retain our forecast for the NZD/USD at 0.68 by the end of the year.”
“AUD/NZD looks undervalued relative to their respective economic surprise index, but the pair will likely trade range bound for now with a neutral RBNZ and lack of data prior to late April.”
“The risk to our view is an aggressive easing from the PBoC, especially in the housing market, which should benefit AUD more than the NZD.”