The NZD continued to strengthen overnight, to sit around 0.7960 this morning. The NZD has recovered from its Fonterra-induced losses. After stable trading around 0.7900 yesterday, the currency gained upward momentum overnight, before finding resistance at 0.8000. It has returned to trade around 0.7960 currently.
The NZD/AUD also continued a steady upward path to sit around 0.8860 this morning. The cross will now be eying its early month highs around 0.8930. However, the outcome of the cross today will likely be very much determined by the release of the AU employment report in the absence of any NZ data releases. Post this week’s RBA rate cut the market still looks for a further 30bps of RBA cuts, partly predicated on a deteriorating employment outlook. We reiterate that although the NZD/ AUD has currently run someway ahead of fundamental ‘fair value’ we do not expect any sort of meaningful ‘correction’.
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BNZ