Westpac sees NZDUSD heading lower still

Discussion in 'Market News' started by ForexLive, Jan 11, 2016.

  1. ForexLive

    ForexLive Forum Member

    Sep 2, 2015
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    Latest client note courtesy of our friends at Livesquawk Say Westpac: 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.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 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%.

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