Forex Flash: NZ strategy profile – Westpac

According to the Westpac Strategy Team, “Despite the volatility over the past few months, the NZD/USD remains in an uptrend so long as the 0.8215 level is not breached on any subsequent pullbacks – conversely, our next upside target is 0.8570.”

The positive trend in NZ 2yr swap yields targets 3.18% next as Governor Wheeler again signaled last week in which direction he expects inflation risks to materialize upwards from the housing market. With RBNZ support, an improving NZ economy, and stable global financial conditions, the path of least resistance for yields is upwards.

In addition, there are two opposing forces on the NZ curve at present: a steepening one from the highly influential US curve, and a flattening one from NZ’s own fundamentals which are pushing shorter term yields upwards as tightening is gradually priced in – net, the curve remains range bound.