NZD/USD Fundamental Forecast – February 11, 2016

Analysis and Recommendation:

The NZD/USD finished higher at .6649, up 0.0016, or 0.24%. The market firmed on greater demand for risky assets after a stock market recovery in Europe and the U.S. Earlier in the session, the Forex pair was under pressure because of sharply lower equity markets in Japan and Australia.

Also driving the market lower was position-squaring ahead of Fed Chair Janet Yellen’s testimony before Congress today at 10:00 a.m. ET. Her comments will be released at 8:30 a.m. ET. Traders should look for increased volatility and volume at that time.

Yellen will talk about a number of subjects ranging from interest rates to banking regulation. However, the main focus by traders will be her response to the future of interest rate hikes in 2016. Traders want to know if the central bank still feels the economy is strong enough to handle another interest rate hike this year, or if there is too much risk due to the weakening global economy. Furthermore, she may be asked to explain why the Fed feels that additional rate hikes are possible given that fact that other central banks are considering additional stimulus including a move to a negative interest rate environment by the Bank of Japan.

In other news, earlier today, the currency forecast team at the Reserve Bank of New Zealand told its clients that they are still anticipating a lower currency in 2016. The cited the following reasons for their assessment:  1) low risk appetite in an uncertain global environment. 2) the falling/soft commodity price environment continuing. 3) narrower NZ-global interest rate spreads, and 4) a weaker CNY and Asian currency dynamic spilling over into the NZD.

Colleagues at the RBNZ also said, “The RBNZ doesn’t like it when the NZD moves higher, against the grain of weaker fundamentals. It means a more difficult task of achieving its inflation objective, which is already proving difficult. Thus, in the last week, the hurdle for further easing has just been lowered.”

This suggests we could soon hear the RBNZ attempt to talk the currency lower.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Upcoming Economic Events that you should be monitoring: 

Thursday, February 11, 2016

 Government Bond Auctions

Date Time and Country

Feb 11 N/A Italy Euro 4-5bn 30-yr syndicated bond auction

Feb 11 11:03 Sweden Holds I/L bond auction

Feb 11 11:10 Italy Announces details of bond auction

Feb 11 11:30 UK 3.5% 2045 Gilt auction

Feb 11 19:00 US Holds 30-year bond auction

Feb 11 n/a US Details of 30-yr TIPS auction on Feb 18

Feb 12 11:10 France Details of bond auction on 18 Feb