NZD should depreciate again on rate solidity from both sides as the Fed hikes and RBNZ eases another 50 bps (only 25 bps is priced).

The newer theme is material deterioration in the current account deficit from -3.5% to -6% or -7% (just shy of the record -8%) on a low household saving rate and falling dairy prices.

The Chinese growth slowdown and weaker commodity prices to factor in H1.

The risk of a more aggressive tightening cycle from the Fed in 2016 as supply side constraints bind.

The probabilities that the EM deleveraging process intensifies are all conceivable headwinds to both AUD and NZD in the New Year ahead.

Although policy de-synchronization will remain a headwind for NZD as short rate differentials compress further, the new thematic for NZD in 2016 is the prospect of a material deterioration in the current account deficit.

This dynamic will take place against a backdrop of raising US yields and thus argues for more risk premium to be priced into the New Zealand dollar.

The risk bias to antipodean currencies remains firmly to the downside in 2016.

Hence, we are bearish on NZD for 2016 and forecast NZD/USD at 0.59 by Q1 of 2016 and 0.61 by Q4 of 2016.