NZD/USD Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average but lacks a clear driver for sustained gains.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand's hawkish stance contrasts with the US Federal Reserve's plans for rate cuts, favoring the NZD.
• Risk/commodities: Improved global risk appetite has supported the NZD, while rising oil prices have generally buoyed commodity-linked currencies, including New Zealand's.
• One macro factor: New Zealand's recent inflation surge, reaching 3.1%, suggests potential monetary tightening, which could bolster the NZD moving forward.
Range: The NZD/USD is likely to hold within its recent range as current conditions suggest limited volatility.
What could change it:
• Upside risk: An unexpected stronger performance in New Zealand economic data could push the NZD higher.
• Downside risk: Increased geopolitical tensions affecting the US could lead to a stronger dollar, weighing on the NZD/USD exchange rate.