NZD/USD Fundamental Analysis – Forecast for the week of August 15, 2016

The NZD/USD saw a climb of 0.80% showing little reaction to the central banks rate reduction and lackluster Chinese data. The kiwi is trading at 0.7202 and remains a strong buy moving into the new week as commodity currencies seem to be doing better than expected. The New Zealand dollar slipped 0.2 per cent after surging on Thursday to its highest in more than a year after its central bank cut interest rates by 25 basis points to 2.0 per cent.

Antipodean currencies ended lower after briefly turning positive on the U.S. data. They fell overnight after data showed China’s economic activity slowed in July, with investment growing at its slowest pace since the turn of the century.

The weaker-than-expected Chinese data covered investment, lending, retail spending and factory output.

The kiwi and Australian dollar were buoyed earlier this week by investors reaching for yields as European and Japanese bond yields offer, in many cases, negative returns. The New Zealand dollar surged to its highest in more than a year on Thursday after its central bank made a smaller interest rate cut than some had expected, driving investors to trim bearish bets made on hopes of more aggressive easing.

The Reserve Bank of New Zealand said a strong kiwi was driving it to cut rates and that it saw potential for one more reduction by year-end and another by mid-2017. Traders said that was too slow relative to expectations with some going into Thursday’s meeting expecting a 50 basis point cut.

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