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Forex Flash: Local event risk is expected to drive the NZD this week – BNZ

FXstreet.com (Barcelona) - The NZD/USD continued to edge higher last week, closing up 0.51% at 0.8508. Some analysts are viewing the recent strength as quite impressive given the lackluster economic data out of China and Australia. It could be a volatile upcoming week for the pair with a few important economic releases to keep an eye on.

According to Mike Jones, Currency Strategist at BNZ, “With the global data calendar fairly quiet, local event risk is expected to drive the NZD this week. In NZ, all eyes are on Thursday’s Household Labour Force Survey. This survey has produced huge NZD reactions in the past, in part because it is so volatile and hard to read. Formally, we are picking a 0.3% rebound in employment and an unemployment rate of 6.7% (market +1.0% and 6.8%).”

He went on to add, “There will also be plenty of NZD direction coming from across the Tasman this week. Expectations for Tuesday’s RBA meeting are finely balanced. Most economists (including our NAB colleagues) expect rates to remain on hold, but the market is 57% priced for a cut. This suggests there will be volatility whatever the decision. If the RBA does not cut, we would look to use the consequent AUD bounce as an opportunity to buy NZD/AUD on a dip as we expect further appreciation in the cross this year; our year-end forecast is 0.8500.

On a final note he commented, “Aside from the RBA, Thursday’s AU employment report and Chinese CPI data will also be important for the NZD. Overall, we hold a mild positive bias for the week; another test of 0.8600 looks likely. Dips towards 0.8460 should be met with strong support.”

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