The hawkish RBNZ, encouraging Delta developments, and recent weakening in the USD are the main positives for the kiwi. Economists at Westpac expect the NZD/USD to race higher towards the 0.73 level on a break above 0.7090.
Delta cases have decelerated recently
“We remain bullish NZD/USD for the week ahead. A break above 0.7090 would signal a potential rise to the 0.7300 area.”
“The primary driver of this two-week old rally is the USD. It has weakened recently, due to Fed Chair Powell’s caution, some data losing momentum, and hawkish ECB comments.”
“The government has slightly relaxed lockdown restrictions for the country outside Auckland. And there are early signs of containment of NZ’s Delta outbreak, although that’s a low confidence view given the limited sample to date. Positive cases have at least not accelerated, while vaccinations continue apace – 24% of the population is now fully vaccinated.”
“We expect NZ GDP to rebound sharply from the expected Q3 fall, and the RBNZ could start hiking in October.”
“The main risks to our bullish NZD view are a worsening of the Delta outbreak, and a rebound in the USD (noting payrolls on Friday).”