NZD/USD likely to trade around 0.67 by end-2018, RBNZ unlikely to hike rates anytime soon

The NZD/USD pair continue to face downward pressure due to fundamental forces. The decline in global equities, falling milk prices and further broadening between interest rates in the U.S. and New Zealand drove the currency pair towards 0.64. Nevertheless, from those lows, it has rallied back towards 0.68, noted Lloyds Bank in a research report.

Speculation that trade tensions might be de-escalated at the upcoming G20 Summit has eased geopolitical concerns, triggering an uptick in risk sentiment and a reduction in the size of the market’s ‘net short’ NZD position.

Meanwhile, the USD has lost its shine. Even though, there appear to be limited upside for NZD/USD. While domestic data might have rebounded, the RBNZ is not expected to hike rates any time soon. The recent guidance implies that policymakers might be considering loosening monetary conditions, although, with inflation rising towards 2 percent and the jobless rate at its lowest in a decade, this looks less likely.

“Assuming a stable risk environment, we expect NZD/USD to remain close to current levels”, added Lloyds Bank.

At 14:00 GMT the FxWirePro's Hourly Strength Index of New Zealand was highly bearish at -146.801, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 73.8711. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex