NZD/USD Outlook: Likely to increase, as the rate is significantly above its recent average and near recent highs, supported by improving market conditions.
Key drivers:
- Rate gap: The Reserve Bank of New Zealand’s rate cuts contrast with the Federal Reserve's more cautious stance, which supports the NZD.
- Risk/commodities: Recent increases in risk appetite have boosted the NZD, as positive trading sentiment enhances demand for riskier assets.
- One macro factor: Ongoing U.S.-China trade tensions continue to pressure the USD, potentially benefiting the NZD as demand for New Zealand exports remains.
Range: Expect the NZD/USD to drift higher within its recent range, approaching its upper limits.
What could change it:
- Upside risk: Strong U.S. labor market data could reinforce USD strength and dampen the NZD’s gains.
- Downside risk: Renewed concerns over New Zealand's economic outlook resulting from ongoing trade barriers could negatively impact the NZD.
