BNZ Look For NZD/USD To Work Its Way Higher

BNZ note that "accentuating the usual NZD-positive global cyclical forces the USD has – finally – seen some significant downward pressure. We have argued about the vulnerability of the USD for some time. Furthermore, the greenback remains overvalued against the key majors. We inevitably see a 0.70 handle for NZD/USD, it just seems a matter of time. Currencies never move in straight lines and we have factored in some short-term consolidation in the NZD, ahead of a more sustained move into a 0.66-0.70 trading range later in the year. The upcoming 19-September election would be a good reason for some pause in the higher NZD trend, with the usual uncertainty around elections, even with Labour heavily favoured to win and shift policy to the left. As usual though we aren't inclined to overplay politics as a sustained driver of the NZD. The impact of RBNZ QE policy on the NZD has been muted to the extent that the G7 central banks are playing the same game. NZ's economy is enjoying a COVID-free renaissance, but we aren't complacent about the growth challenges ahead, with the imminent removal of the wage subsidy and inbound tourism unlikely to return soon. However, these factors are secondary to the bigger global picture, which is driving our positive NZD/USD outlook. Exporters should take advantage of any pre-election dips while importers can afford to keep hedging cover light, with better opportunities seen ahead."