CAD/NZD Outlook:
Bearish, as the CAD is below its recent average and near recent lows amid falling oil prices affecting its strength.
Key drivers:
• Rate gap: The Bank of Canada maintains a cautious stance, while the Reserve Bank of New Zealand may implement interest rate cuts, creating pressure on the CAD relative to the NZD.
• Risk/commodities: As oil prices have declined recently, they are hurting the Canadian dollar since Canada is a significant oil exporter.
• One macro factor: Strong performance in New Zealand’s service sector growth is expected to support the NZD.
Range:
The CAD/NZD rate is likely to drift within its recent range, given current pressures on the CAD.
What could change it:
• Upside risk: A rebound in oil prices could strengthen the CAD, improving its position against the NZD.
• Downside risk: Further interest rate cuts by the Reserve Bank of New Zealand could weigh on the NZD, but current trends suggest more stability for the currency.