NZD/XPF Outlook: Bullish, as the rate remains significantly above its recent average and close to recent highs, supported by current risk appetite.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand is adopting a policy of easing, while the CFP Franc’s stability is supported by its peg to the euro, which contrasts with the RBNZ's direction.
• Risk/commodities: Recent improvements in market mood have favored commodity-linked currencies like the NZD, whereas the volatile oil market may pressure currencies like the XPF.
• Macro factor: Ongoing U.S. tariffs on New Zealand exports create uncertainties that could affect the NZD's strength, which is crucial in export-driven markets.
Range: The NZD/XPF pair is likely to hold its gains within the tight range it has established but may drift sideways as uncertainties linger.
What could change it:
• Upside risk: A significant increase in global demand for New Zealand's exports could boost the NZD.
• Downside risk: New Zealand's ongoing economic contraction could lead to weaker NZD performance against the XPF.