8 Jul 2014
NZD/USD to soften to 0.8600 - Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained that there are signs that the New Zealand economy could be coming off the boil.
Key Quotes:
“While the NZ economy appears to have sidestepped the risk of secular stagflation (when low interest rates fail to invigorate investment and employment growth) that is hanging over other major economies, there are signs that the economy could be coming off the boil”.
“Overnight a business confidence survey dropped sharply and, while house price inflation is still strong, the pace of the gains is moderating. In addition, dairy prices have softened dramatically”.
“The price set at the fortnight Global Dairy Trade auction has dropped 31% since February which implies a significant reduction in dairy incomes in the months ahead”.
“Although cracks in the NZ’s strong economic backdrop are appearing, the market is fully priced for another two 25 bps rate hikes by September and currently sees a strong chance of yet another move by the end of the year. We see this as too aggressive. The next RBNZ policy meeting is scheduled for July 23. We expect the hawkish rhetoric to be toned down and we expect NZD/USD will soften back to the 0.86 area by the end of the year”.
Key Quotes:
“While the NZ economy appears to have sidestepped the risk of secular stagflation (when low interest rates fail to invigorate investment and employment growth) that is hanging over other major economies, there are signs that the economy could be coming off the boil”.
“Overnight a business confidence survey dropped sharply and, while house price inflation is still strong, the pace of the gains is moderating. In addition, dairy prices have softened dramatically”.
“The price set at the fortnight Global Dairy Trade auction has dropped 31% since February which implies a significant reduction in dairy incomes in the months ahead”.
“Although cracks in the NZ’s strong economic backdrop are appearing, the market is fully priced for another two 25 bps rate hikes by September and currently sees a strong chance of yet another move by the end of the year. We see this as too aggressive. The next RBNZ policy meeting is scheduled for July 23. We expect the hawkish rhetoric to be toned down and we expect NZD/USD will soften back to the 0.86 area by the end of the year”.