NZD: Set To Struggle Vs USD & To Stay Flat Vs AUD: Where To Target?
NZD is likely to struggle versus the USD in 2017, and to stay mostly flat versus the AUD. The RBNZ has been trying to dampen expectations of an early rate rise and core inflation and inflation expectations remain low.
However, with New Zealand having one of the most positive output gaps among G10 peers, the RBNZ may not be able to keep rates low for long, and If the RBNZ were to raise rates faster than expected in 2018, the NZD could outperform.
We targets NZD/USD at 0.68, 0.67, and 0.66 by the end of Q2, Q3, Q4 respectively and targets AUD/NZD at 1.09 through the rest of the year.