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NZD/USD short to long term outlook - Westpac

FXStreet (Guatemala) - Imre Speizer, analyst at Westpac Banking Corporation ABN explained that multi-week bounce in NZD/USD towards 0.8100 remains in progress.

Key Quotes:

“Aside from the RBNZ's reminder that the tightening cycle is not yet complete, domestic economic news has generally been positive”.

“Also supportive in the near term is speculative positioning which has been extremely short”

“One NZ risk to this positive near term view is this week’s RBNZ inflation expectations report (Tue). The RBNZ pays close attention to this survey, so that any decline would probably cause the market to cut NZ interest rates even further”.

“In addition, there’s a lot of data from the US (including GDP) which could affect the US dollar. We expect the data to be slightly USD-supportive”.

“Over the medium term, there remains potential for it to fall to 0.7500 by February if the USD resumes its Fed-driven uptrend and NZ dairy prices fall further".

"Moreover, inflation at the bottom of the RBNZ’s 1%-3% target band will keep the RBNZ on hold for at least the year ahead (the market is pricing no more hikes until Dec 2015), which means the NZ-US interest rate differential is vulnerable to falling further”.

“By late 2015, the exchange rate could stage a rebound to the low 0.80’s if NZ’s commodity prices rise in line with global demand. This, plus positive risk sentiment, should offset any interest rate disadvantage resulting from the long-awaited Fed tightening”.

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