NZD/SBD Outlook:
Slightly positive, but likely to move sideways, as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand's potential interest rate cuts may weigh on the NZD against the expansionary policies of the Central Bank of Solomon Islands, which aims to support growth.
• Risk/commodities: High dairy prices are currently boosting New Zealand's export income, providing support for the NZD while the SBD is impacted by the broader economic developments.
• One macro factor: Increased tariffs from U.S.-China trade tensions could influence New Zealand's export dynamics, indirectly affecting the NZD.
Range:
The NZD/SBD pair is expected to hold in its current range, as fluctuations are likely to remain moderate.
What could change it:
• Upside risk: A positive shift in risk appetite could strengthen the NZD further if trade relations improve between New Zealand and major partners.
• Downside risk: Strong economic developments in the Solomon Islands, particularly in tourism, might strengthen the SBD against the NZD.
