NZD/USD: Pullback from 2015 highs - Westpac

NZD/USD was knocked back from highs since 2015, partly by soft Q2 jobs data as the unemployment rate slipped even as employment fell due to lower participation, according to Martina Song, Research Analyst at Westpac.

Key Quotes

“The RBNZ policy announcement should also weigh on NZD. We have long held the view that market pricing for hikes is overly optimistic. Since the last meeting we’ve seen lower than expected Q2 inflation, the housing market slowing more rapidly than the RBNZ assumed and the higher NZD threatens the inflation outlook. So we expect a more dovish tilt from the RBNZ next week.”

“A softer US dollar would limit NZD/USD downside but the kiwi should be heavy on crosses if the more dovish bias from the RBNZ does materialise. AUD/NZD could probe higher towards 1.08 if commodity prices continue to support the Aussie.”