21 Jul 2014
Disappointments from NZD - Rabobank
FXStreet (Guatemala) - The worse performing developed world currency in the past five days has been the NZD.
Key Quotes:
“NZD/JPY has fallen 1.48% over the past week and AUD/JPY is also bias lower”.
“The trigger from the adjustment in the NZD stems from the perception that they may have been too much good news in the price”.
“The RBNZ has already hiked interest rates three times this year and up until recently the market saw a decent chance of up to another three 25 bp rate hikes by the end of this year, including an anticipated move later this week”.
“However, in early July a NZ business confidence survey dropped sharply suggesting that this year's three 25 bps rate hikes are taking a toll. The pace of the gains in house price inflation also appears to be moderating. Also, the price set in the Global Daily Trade auctions has dropped a whopping 34% since February; this will impact dairy related incomes. On top of all this Q2 CPI inflation registered a softer than expected 1.6% y/y”.
“This suggests that price pressures have been checked both by the firmer tone in interest rates but also as a result of the strength of the NZD”.
“While another rate hike this month appears to be a foregone conclusion we expect the RBNZ’s hawkish rhetoric to be toned down at the July 23 meeting and we expect NZD/USD will soften back to 0.86 area in the coming months”.
Key Quotes:
“NZD/JPY has fallen 1.48% over the past week and AUD/JPY is also bias lower”.
“The trigger from the adjustment in the NZD stems from the perception that they may have been too much good news in the price”.
“The RBNZ has already hiked interest rates three times this year and up until recently the market saw a decent chance of up to another three 25 bp rate hikes by the end of this year, including an anticipated move later this week”.
“However, in early July a NZ business confidence survey dropped sharply suggesting that this year's three 25 bps rate hikes are taking a toll. The pace of the gains in house price inflation also appears to be moderating. Also, the price set in the Global Daily Trade auctions has dropped a whopping 34% since February; this will impact dairy related incomes. On top of all this Q2 CPI inflation registered a softer than expected 1.6% y/y”.
“This suggests that price pressures have been checked both by the firmer tone in interest rates but also as a result of the strength of the NZD”.
“While another rate hike this month appears to be a foregone conclusion we expect the RBNZ’s hawkish rhetoric to be toned down at the July 23 meeting and we expect NZD/USD will soften back to 0.86 area in the coming months”.