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Jun 06 - 12:55 AM

CIBC: Revised Outlook for NZD/USD

By eFXdata  —  Jun 05 - 04:30 PM

Synopsis:

CIBC assesses the impact of the Reserve Bank of New Zealand's (RBNZ) recent monetary policy statement (MPS) and its implications for NZD/USD. The RBNZ's revised forecasts, which pushed back the timing of expected rate cuts, have contributed to a mildly hawkish outlook.

Key Points:

  1. RBNZ's May MPS Updates: The MPS unexpectedly revised the Official Cash Rate (OCR) peak forecast to 5.65% by Q4 2024, suggesting a potential additional 15bps hike by November 2024 before rate cuts commence. The MPS now anticipates beginning rate cuts in Q4, later than previously projected.

  2. Market Skepticism and RBNZ's Hawkish Tone: Despite the RBNZ's hawkish forecasts, market pricing reflects skepticism, anticipating a 17bps cut by November 2024. CIBC aligns with market expectations, foreseeing no additional hikes but a delayed start to rate cuts, likely not before November 2024 or even February 2025.

  3. Economic Indicators and Inflation Risks: Key economic data, such as rising unemployment and managed economic slowdown, support the view of a cautious RBNZ approach. The government's budget deficit indicates inflationary pressures but also underscores concerns about GDP growth.

  4. NZD/USD Forecast Revision: With the RBNZ's less dovish than expected stance and projected US dollar strength, CIBC revises its Q2 forecast for NZD/USD to 0.60 by end-June, up from the previous 0.59.

Conclusion:

CIBC's analysis indicates that the RBNZ's updated forecasts and the broader economic context will keep the NZD/USD under modest pressure but slightly higher than initially anticipated. The bank's patient and cautious approach to monetary policy, combined with external factors such as US economic performance, will be critical in shaping the currency pair's trajectory.

Source:
CIBC Research/Market Commentary

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