2025 Market Outlook: Key January Events to Watch 
Chile Central Bank Holds Interest Rate at 4.5% as Inflation and Global Risks Persist 
Fed Holds Interest Rates Steady as Kevin Warsh Says Rising Treasury Yields Tighten Financial Conditions 
S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays 
BOJ Holds Rates at 1% as Inflation Outlook Eases, October Rate Hike Still Possible 
Gold Slips Below $4050 as Bond Yields Surge to 4.7% on Fed Inflation Concerns – Sell Rallies at $4060 Targeting $3940 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
BOJ Seen Holding Rates at 1% While Keeping Inflation Risk Warning 
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A slight loss of NZ economic momentum over the next quarter and more neutral speculator positioning (from extremely short) should weigh on the NZD. Key, though, will be the behavior of the US dollar. if the Fed hikes twice more in 2019, NZDUSD should fall below 0.66 by May. The RBNZ expects to remain on hold over the next year at least, and we agree. That should cap 2yr yields at 2.30%, while a slight loss of economic momentum both in NZ and in developed economies could see the lower bound at 1.95% tested occasionally as markets flirt with a rate cut.
Keep defensive anti-cyclical exposure through short NZDUSD. The 2019 Outlook, we had adopted a cautiously defensive position in part expressed through short NZDUSD.
We continue to like NZD shorts given expectations of a dovish-to-unchanged monetary policy and also given its sensitivity to global growth. The main event this week for New Zealand was the soft 4Q CPI report.
We don’t think this justifies a rate cut from the RBNZ in 2019, even though we do expect downgrades to inflation (mostly on oil) and growth and thus a dovish spin on the outlook.
Note that the AED we recommended in November expired worthless, but we still retain short NZDUSD exposure in outright spots and reactivated optionality.
Sell NZDUSD at 0.6783, stop at 0.6919. Stay short in NZDUSD through an AED digital put (strike of 0.6195, expiry 28thFeb, 2019). Courtesy: Westpac, JPM
Currency Strength Index: FxWirePro's hourly NZD spot index is flashing 107 (which is bullish), while hourly USD spot index was at -58 (bearish) while articulating (at 10:11 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
