S&P have downgraded their outlook for the NZD/USD which has caused a drop of some 60-70 points NZD/USD to 0.7755 and the AUD/USD has been dragged with it.
The outlook was downgraded from ‘stable’ to negative’ citing:
“The outlook revision on the foreign currency ratings reflect our recognition of the risks stemming from New Zealand’s projected widening external imbalances in the context of the country’s weakened fiscal flexibility,” said Sovereign Ratings credit analyst Kyran Curry. “New Zealand’s vulnerability to external shocks, arising from its open and relatively undiversified economy, also raises risks to the country’s economic recovery and credit quality.”
Standard & Poor’s stresses, however, that these weaknesses are mitigated by New Zealand’s fiscal and monetary policy flexibility, strong institutions, economic resilience, and its actively traded currency.
We can expect the AUD to gain on the cross as further selling of NZD is likely later
