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- NZD/USD: RBNZ triggers recession with Kiwi underperformance ahead – MUFG
NZD/USD: RBNZ triggers recession with Kiwi underperformance ahead – MUFG
NZD/USD continues to trade between 0.6000 and 0.6400 as it has done for most of this year. Economists at MUFG Bank analyze Kiwi outlook.
Rebound in commodity prices offers more support for NZD
We expect inflation to slow further in the coming months prompting the Fed to signal a pause to their hiking cycle at the Jackson Hole symposium in late August or September FOMC meeting. The developments have triggered an improvement in global investor risk sentiment and rebound in commodity prices that are offering more support for the NZD.
While the external developments have moved in favour of a stronger NZD recently, domestic developments are less supportive. New Zealand’s economy fell into recession in Q1. The weak cyclical performance is expected to continue in the coming quarters as the negative impact of higher rates feeds through to the economy.
We expect the RBNZ’s next policy move to be a cut later this year or in early 2024 weighing on the Kiwi.
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