Barclays expect the NZD to be "a notable.......>

KIWI: Barclays expect the NZD to be "a notable underperformer over the coming

quarters, as low inflation & sub-potential GDP growth support the prospect of

RBNZ rate cuts over the coming year. Q2 GDP surprised both market and RBNZ

expectations to the upside, but importantly remained below the 3% potential GDP

growth rate of the economy. NZ house prices continue to moderate. Wage inflation

remains low, but given low levels of unemployment, higher rates of wage

inflation represent an upside inflation risk, particularly if immigration falls

significantly or planned minimum wage rises cascade into demands for wage

increases. Escalating US-China trade tensions should contribute to NZD

underperformance versus both G10 & EM FX given the country's large exports to

China (and Australia) & the negative effects of slowing Chinese activity on

global commodity prices. The high-yielding USD's increasing competition for

global portfolio flows is also likely to keep downward pressure on the NZD given

New Zealand's dependence on global savings. U.S.-NZ interest rate differentials

are likely to widen materially over the coming year. We also expect the AUD to

outperform the NZD on the expectation that the RBA will hike before the RBNZ."