TD Research discusses NZD outlook around next week's RBNZ policy meeting.
"We think this might be a bit much for the RBNZ to start a tightening cycle, which is now likely to occur one year in advance of what the bank had initially projected at its forecast meeting. And, with the RBNZ likely to embark on a series of hikes, it does not make much sense to deliver beyond 25bp increments. Nonetheless, we think this should help support NZD ahead of the meeting. While NZDUSD has put in good work to form a base and we are biased to some upside, we are a bit wary of the USD leg," TD notes.
"We also note that on our cross-asset FV dashboard, the NZD still offers some value, though this has compressed in recent weeks. Across the G10 however, there isn't much value left. That said, we are more comfortable in pursuing NZD undervaluation on the crosses where we note far more benign central bank stances; EURNZD and NZDJPY," TD adds.