Latest client note courtesy of our friends at Livesquawk
Say Westpac:
1 week:
The recent slide should continue during the week ahead,
our near term target 0.6430 - the November low. Commodity currencies
(and commodities) are under pressure again, thanks to a bout of risk
aversion since the beginning of 2016 which has seen the likes of the
Chinese stock market and Mexican and South African currencies plunge.
The
NZ data calendar is unlikely to ruffle markets too much, but the US
calendar contains retail sales, industrial production, and more, plus
plenty of Fed-speak to decipher for monetary policy clues.
3 months:
We
expect NZD/USD to remain under downward pressure during the next few
months, targeting sub-0.64. Our main argument is that the Fed should
raise US interest rates further this year but markets have priced little
in. The labour market is looking strong and that should eventually
result in wage inflation, in turn causing the Fed to tighten. After
starting the tightening cycle in December, it could follow up in March,
taking the policy rate to 0.625%.
In contrast, the RBNZ should remain on hold at 2.5%, but with downside risks.
1 year:
Our
1 year ahead forecast is 0.62, based partly on the OCR being cut by
another 50bp to 2.0%, but the Fed rate to rise by 100bp to 1.375%.
NZDUSD currently 0.6530
