Goldman Sachs on the NZD earlier today (bolding is mine):
- Given the strong tone of NZ’s dataflow and an expectation that the RBNZ will deliver additional interest rate hikes in at least its next two meetings before pausing, it is hard to envisage a meaningful reversal in the NZD’s fortunes in the near term. That said, with this ‘NZ outperformance’ story now well appreciated by the market (with around an additional 165bp of RBNZ hikes priced in over the next two years), the hurdle for additional positive surprises is likely high as a result. In our view, this places the onus more on the USD to drive near-term NZD direction.
- We expect US activity to pick up notably in Q2 and beyond as the negative influence on activity from the unseasonably cold weather in Q1 and the inventory drag both fade
- outside of a more positive USD view, and notwithstanding the upside risks we see to our NZ economic view more generally in the near term, we believe some of the tailwinds driving economic momentum in NZ (and the NZD more specifically) have now started to wane
- expect the NZD to weaken to 0.76 over the next 12 months
- it should trade (against AUD) at 1.08 in 12 months (i.e., around the current spot) on the basis of our forecasts for the inputs to the model.
…When NZ’s growth dynamics start to soften materially versus Australia – which we expect from 2H2014, we could see a more material reversal in NZD strength against the AUD. But we think it would be wise to wait for stronger confirmation of this, and possibly better entry points, before taking a more active view.
via MNI
