Synopsis:

ANZ maintains its NZD/USD forecast at 0.55 for H1 2025, with an expected recovery in H2 as excessive short positioning unwinds. While falling US bond yields and weakening US exceptionalism have supported the NZD, near-term risks remain due to tariff uncertainty and weak risk sentiment. The direct impact of US tariffs on New Zealand exports is minimal, and the NZD is likely to act as a shock absorber. Markets have largely shrugged off the RBNZ’s February rate cut and Governor Adrian Orr’s resignation, focusing instead on broader monetary policy stability.

Key Points:

1️⃣ NZD/USD Stuck in Range, Forecast Remains at 0.55 📉

• Current range: 0.56-0.5750.
• Forecast: 0.55 in H1 2025, rising thereafter.

2️⃣ Near-Term Caution Due to Tariff Uncertainty & Risk Sentiment ⚠️

• US tariffs have minimal direct impact on NZ exports.
• NZD likely to act as a shock absorber amid trade risks.
• Weak global risk appetite may weigh on NZD near-term.

3️⃣ Market Shrugs Off RBNZ Rate Cut & Orr’s Resignation 🏦

• February's 50bp rate cut had little FX impact as it was widely expected.
• Orr’s resignation also had a muted reaction, with focus shifting to policy continuity.
• Terminal OCR expected at 3.00%, below the RBA (3.85%) and Fed (3.75%), reducing NZD’s rate appeal.

4️⃣ H2 2025 Recovery Expected as Short Positioning Unwinds 🔄

• NZD/USD positioning is net short by a record margin (CFTC non-commercial data).
• Potential for a short squeeze to drive NZD/USD back toward 0.59.

Conclusion:

ANZ remains cautious on NZD/USD in the near term due to trade risks and weak sentiment, but expects a recovery in H2 2025, driven by short covering and a return to fair value (~0.59). Monetary policy stability and easing US exceptionalism should also help NZD regain strength later in the year.