NZD/USD outlook

After the worst performance of any G10 currency this year, the New Zealand dollar has likely neared its bottom and is set for a modest recovery against the USD. Expectations of another 25 bps interest rate cut from the central bank- the fourth consecutive cut and possibly the last - are largely priced in by domestic interest rate markets. 

Milk prices, a key export for New Zealand, have also risen, albeit from a low base. This should provide further help for the New Zealand dollar. 

"Even if the central bank continues to cut interest rates, a break below 0.60 against the USD would unlikely be sustained on a technical and fundamental basis. From here we look for a retracing of the recent weakness in the New Zealand dollar before the exchange rate stabilizes between 0.650-0.700", argues Lloyds Bank.