New Zealand Dollar Talking Points
NZD/USD[1] gives back the advance following the US Non-Farm Payrolls (NFP) report[2] after struggling to test the March high (0.7303), but the exchange rate may continue to negate the head-and-shoulders formation from earlier this year amid the failed attempt to close below the 50-Day SMA (0.6957).
NZD/USD Rate Outlook Mired by Failure to Test March High
NZD[3]/USD[4] has taken out the April range as the 266K NFP[5] print curbs speculation for a shift in monetary policy, and the Federal Reserve may continue to utilize its emergency measures over the coming months as the central bank braces for a transitory rise in inflation.
It seems as though the Reserve Bank of New Zealand (RBNZ) will follow a similar approach as the updated Financial Stability Report (FSR) warns that “parts of the economy appear more vulnerable to future downturns
than before the pandemic,” and the central bank appears to be in no rush to switch gears as “New Zealand’s economic prospects ultimately depend on the global containment of the pandemic and on the recovery of trading-partner economies.”
At the same time, the RBNZ acknowledged that longer-term yields have recovered as “downside risks to economic growth appear less likely and inflation expectations have lifted,” but went onto say that “further increases in long-term interest rates could expose vulnerabilities in asset valuations and drive greater market volatility” as major central banks rely on their emergency tools to achieve their policy targets.
In turn, the RBNZ may keep the door open to implement a negative interest rate policy (NIRP) as Governor Adrian Orr and Co. remain “prepared to lower the Official Cash Rate (OCR) if required,” and the central bank may continue to offer a dovish
