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Factors abroad having larger influence on NZD/USD downward progress - BNZ

FXStreet (Łódź) - Raiko Shareef, Currency Strategist at BNZ sees developments outside of New Zealand having more impact on the kiwi this month than in the previous.

Key quotes

"The USD has rallied broadly, as more market participants buy into the view that the US Federal Reserve will formally incorporate the risk of earlier rate hikes in its upcoming policy meeting next week."

"This view received a boost from Fed Chair Yellen, when she failed to sound stridently dovish in her keynote Jackson Hole address. The market took this as a bit of a green light to enter USD longs."

"Locally, the continued softening of domestic data built the case for the RBNZ to temper its aggressive track of projected rate hikes. And that’s exactly what the Bank delivered at its September policy meeting, lopping 50bps off its rate track by December 2016."

"Furthermore, the overall tone of RBNZ commentary was one that warned of downside risks to these updated projections, which helps to limit NZD upside."

"Of course, given the hoopla around the Scottish referendum, we would be remiss not to point out political risk here in NZ."

"While polls have narrowed somewhat, a largely unchanged government looks to be the likely outcome of the 20 September General Election. It would take a combination of further poll tightening and markedly higher international media coverage before NZD is impacted to any significant degree."

"For one thing, any pre-election impact should be overshadowed by the 17 September Fed meeting, where the market is expecting the FOMC to strike a more optimistic beat."

"This would vindicate the USD rally, and give it reason to extend further. We see NZD/USD at 0.73 by end-2015."

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