5 Aug 2015
NZD/USD to fall towards 0.62 by year-end - Westpac
FXStreet (Bali) - Imre Speizer, FX Strategist at Westpac, exposes the bank's core view on NZD/USD, expecting the exchange rate to fall towards 0.62 by year-end.
Key Quotes
"We expect NZD/USD to fall to at least 0.62 by year end. But what if we are wrong about the RBNZ, milk, and the Fed? We expect the main influences on NZD/USD during the remainder of this year to be from the RBNZ, dairy commodity prices, and the Federal Reserve. We have a view on how these variables are likely to evolve during the remainder of this year, and by implication how NZD/USD behaves. However it’s worth briefly exploring plausible alternative scenarios and what those may do to NZD/USD."
"Our central scenario: We expect the RBNZ to cut the OCR by another 50bp to 2.5% by year end (with more to come early 2016). Over the same period, we expect the Fed to hike by 50bp. Such a combination could cause the NZ-US 2yr swap spread to fall by 60bp (from a current level of 190bp). NZ’s main export commodity, whole milk powder, is expected to fall by another 5% by year end. Plugging these forecasts into a simple short term fair value model for NZD/USD suggests it should fall by 6%, from 0.66 to 0.62."
Key Quotes
"We expect NZD/USD to fall to at least 0.62 by year end. But what if we are wrong about the RBNZ, milk, and the Fed? We expect the main influences on NZD/USD during the remainder of this year to be from the RBNZ, dairy commodity prices, and the Federal Reserve. We have a view on how these variables are likely to evolve during the remainder of this year, and by implication how NZD/USD behaves. However it’s worth briefly exploring plausible alternative scenarios and what those may do to NZD/USD."
"Our central scenario: We expect the RBNZ to cut the OCR by another 50bp to 2.5% by year end (with more to come early 2016). Over the same period, we expect the Fed to hike by 50bp. Such a combination could cause the NZ-US 2yr swap spread to fall by 60bp (from a current level of 190bp). NZ’s main export commodity, whole milk powder, is expected to fall by another 5% by year end. Plugging these forecasts into a simple short term fair value model for NZD/USD suggests it should fall by 6%, from 0.66 to 0.62."