CAD/NZD Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and lacks a clear driver for a change.
Key drivers:
• Rate gap: The Bank of Canada has reduced its rate, while the Reserve Bank of New Zealand's easing continues, widening the gap and supporting the NZD.
• Risk/commodities: Oil prices are above average but have seen volatility, affecting the CAD, which could experience pressure if oil prices decline further.
• One macro factor: Ongoing trade tensions, particularly U.S. tariffs, continue to pose challenges for New Zealand's export revenues, adding uncertainty to the NZD's position.
Range: Expect CAD/NZD to hold steady within its recent range, drifting gradually as both currencies face external uncertainties.
What could change it:
• Upside risk: A significant increase in oil prices could strengthen the CAD by boosting export revenues.
• Downside risk: Further evidence of economic contraction in New Zealand could widen the gap further, pushing the NZD down relative to the CAD.
