Weekly Forex & Interest Rate Outlook

This week may be a replay of the last – strong NZ fundamentals countered by the continuing US fiscal crisis, resulting in a lack of direction.

Using the 2011 debt ceiling episode as a template, we can expect the US dollar to remain on the back foot against core currencies such as the yen, but the general risk averse atmosphere should also hurt the NZD more than the US dollar. Thus, a move towards the bottom of the past month’s range at 0.8200 is possible. Once the US’ fiscal issues are resolved, though, we would expect a break above 0.8350 to signal a resumption of the uptrend to beyond 0.8430. The flow of NZ economic data has been strong lately, something we expect to continue during the months ahead.