NZD/HKD Outlook:
The NZD is likely to increase as it is trading above its recent average and near recent highs, supported by strong commodity prices.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand is signaling possible interest rate cuts while the Hong Kong Monetary Authority is actively maintaining the HKD's peg to the US dollar.
• Risk/commodities: Strong dairy prices have significantly bolstered New Zealand's export income, supporting the NZD despite some risk aversion in the market.
• One macro factor: Recent trade relations improvements between the U.S. and New Zealand, particularly the lifting of tariffs on key exports, lend further support to the NZD.
Range:
The NZD/HKD is expected to test the upper extremes of its recent range, with potential volatility influenced by commodity price swings.
What could change it:
• Upside risk: A significant rebound in global risk appetite could enhance NZD demand further.
• Downside risk: A worsening of labor market conditions in New Zealand could weigh on the NZD's performance.