NZD/USD remains resilient to US data surprises.
Surprisingly, good US economic news is not pushing the US dollar higher. Our view that NZD/USD would fall to 0.79-0.80 during December in response to strong US data is thus in doubt. Meanwhile, NZ economic fundamentals remain strong (Chart 2) and provide some support for NZD/USD. Although be wary of this week’s RBNZ meeting which could be used to talk the high NZD down. In addition NZ interest rates should fall slightly because the RBNZ won’t signal a January hike. The week ahead could thus be volatile, with a drift towards 0.8400, possibly helped by any Fonterra milk payout news, but punctuated briefly by the RBNZ, and exacerbated by thinning Xmas holiday conditions. Looking further ahead, by mid-2014, strong NZ fundamentals and RBNZ tightening should become more prominent, taking NZD/USD towards 0.8600.
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