NZD/USD to trade under pressure near-term – Lloyds Bank

Analysts at Lloyds Bank explain that the New Zealand dollar has been under pressure in recent weeks, falling to the lower bound of its range near 0.69, as a raft of ‘hawkish’ Fed speakers alerted the market to the prospect of the FOMC raising rates in March but following the 25bp rise in the Fed funds rate, the failure of the committee to raise its median expectation on the ‘dot plot’ saw part of this move reverse.

Key Quotes

“At its latest meeting, the RBNZ left interest rates unchanged, and is unlikely to alter its stance in the foreseeable future. Governor Wheeler adopted a relatively ‘dovish’ tone, suggesting monetary policy will remain accommodative for a “considerable period”.”

“Moreover, the price of milk – a key export for New Zealand – has dropped sharply from its peak in December. In spite of this, other economic indicators have been robust. The annual pace of GDP growth remains above 3% and the current account deficit has narrowed. Given the RBNZ’s position on monetary policy, we see scope for NZD/USD weakness, forecasting 0.67 by end-2017.”