According to analysts from Rabobank the next meeting of the Reserve Bank of New Zealand (RBNZ) will be crucial. They see the central bank still set to be more hawkish than most of the other G10 central banks. They favor selling rallies in EUR/NZD for a move back to the 1.63 area.
Key Quotes:
“Today’s surge in the in the value of NZD/USD is testament to the ratchetting up of RBNZ rate hike expectations. After the Norges Bank the RBNZ has been widely considered as one of the most hawkish G10 central banks for some time. However, the shift in market expectations on the back of an overnight data release now suggests that the RBNZ is now widely considered to be well ahead of the BoC in terms of rate hike potential. The official guidance of both of these central banks suggests that rates could be on hold until the second half of 2022, though some commentators are now forecasting a rate hike from the RBNZ as soon as November this year. The RBNZ policy meeting on July 14, will be crucial in terms of policy guidance.”
“Given that both yields and the NZD have already adjusted higher, monetary conditions have already tightened and we see scope for the RBNZ to temper some of the enthusiasm about rate hike potential in the coming weeks. That said, the RBNZ is still set to be more hawkish than most other G10 central banks.”
“Given that we expect the USD to remain on the front foot this summer given the focus on the possibility of Fed tapering, we would favour buying dips in the NZD vs. the EUR. We see scope for a move back to the February low at in the EUR/NZD 1.63 area on a 3 month view.”
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