New Zealand Dollar Fundamental Forecast: Bearish
NZD Outlook Talking Points:
- The New Zealand Dollar fell amidst trade war fears and a lower RBNZ rate outlook
- Next week’s RBNZ could be a non-event and perhaps lack a volatile NZD[1] reaction
- NZD may fall as USD[2] rises on local data while stocks are at risk to tariff escalation
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The New Zealand Dollar came under selling pressure as increased trade war tensions between the US and China sent stocks lower during the first part of last week. There, US President Donald Trump threatened the world’s second largest economy with $200b in tariffs[4]. Then, the Kiwi Dollar resumed depreciating as the markets anticipated a flatter outlook for RBNZ rates in the long run[5].
BACKGROUND: A Brief History of Trade Wars, 1900-Present[6]
Looking to next week, NZD might have room to continue descending. The currency does face an interest rate decision from the Reserve Bank of New Zealand, but that may pass without much volatility. Since May’s monetary policy announcement, there has not been much of economic updates to perhaps materially alter their assessment. Only last week, we had an in-line local GDP report where growth clocked in at 2.7% y/y in Q1.
Back in May, RBNZ Governor Adrian Orr said that he wants to see core inflation to rise before raising rates. Given that we have not had a CPI update since then, this opens the door
