NZD/USD: Vulnerable in the short-term – Westpac

Analysts at Westpac Institutional Bank are expecting a deterioration in the second half of 2020 which will lead to policy rate cut both in New Zealand and the United States. NZD/USD is being exchanged at 0.643.

Key quotes

“We continue to forecast one more OCR cut, in August, based on our expectation global sentiment will deteriorate later this year, and the US economy will slow, causing the Fed to cut its policy rate.”

“There is no strong domestic reason for the RBNZ to contemplate easing. It noted an unexpected pickup in GDP growth, house prices and wage growth over the past quarter, and expected these themes to endure over 2020 along with an increase in government spending.”

“NZD/USD consolidating but vulnerable to pandemic-led fall below 0.6400. Then potential for rebound to 0.6600 in Q2 as NZ economic outperformance is recognised and USD weakens on Fed easing prospects.”