NZD/USD: Potential to grind higher, should the risk environment remain supportive - CIBC

Analysts at CIBC, see the New Zealand dollar with some potential to the upside, it risk environment continues to be supportive and also another rate cut from the RBNZ. 

Key Quotes: 

“Despite cutting rates at its May meeting, the RBNZ has seen the NZD rebound against G3 currencies. Most of this move is attributed to improved risk sentiment, as the US and China enter a temporary truce period. Dovish central banks elsewhere, and a repricing of an overly dovish RBNZ, have also contributed to the move.”

“Fundamentals in New Zealand have begun to rebound, with Q1 GDP at 2.5% y/y - just a tick under the RBNZ’s projections released in the May Monetary Policy statement. Credit card spending has ticked higher since the rate cut, and we continue to expect consumer spending to be an important driver of growth moving forward.”

“Sentiment remains lacklustre, as business confidence continues to fall, as firms become more pessimistic on profits. In addition, the RBNZ has express concerns that lower commodity prices will have a negative impact on inflation. For these reasons, we believe that there is room for another OCR cut in August, which has already been priced into the market. With G3 banks maintaining a dovish tone, we see potential for NZD to grind higher, should the risk environment remain supportive.”