Synopsis:

Credit Agricole maintains a constructive outlook on NZD/USD, expecting a gradual move higher through 2024. The upside is supported by broad USD weakness, the potential for positive local data surprises, and a reallocation of capital from US to Asian assets. Additionally, New Zealand’s low trade exposure to US tariffs offers insulation compared to peers.

Key Points:

1️⃣ Capital Rotation Favors NZD 🌏💸

• Investors are diversifying away from US assets, with Asian markets—including New Zealand—seen as beneficiaries.

• NZD is expected to benefit from this broader capital flow dynamic.

2️⃣ Limited Tariff Impact on NZ Exports 🚫📦

• US reciprocal tariffs are expected to have minimal effect on NZ, despite its 15% GST.

• NZ has lower overall tariffs than the US, providing relative insulation in trade tensions.

3️⃣ Scope for Local Upside Surprises 📈

• Room remains for positive economic data surprises in New Zealand, which could add incremental NZD support.

4️⃣ Target Path for NZD/USD 🔢

• End-Q2: 0.58

• End-Q3: 0.58

• End-Q4: 0.60

Conclusion:

Credit Agricole expects NZD/USD to grind higher over 2024, targeting 0.60 by year-end. The outlook is driven by a weaker USD, potential NZ data surprises, and relative insulation from US tariffs, with investor rotation toward Asia-Pacific assets adding further tailwinds.