NZD likely to be capped around current levels - BNZ

Jason Wong, Currency Strategist at BNZ, thinks that over the next couple of weeks, the NZD could well be capped around current levels.

Key Quotes

“The risk is that the NZD drifts lower as we approach the 23 June UK referendum on EU membership. The polls suggest a close outcome and momentum on current polling seems to lie with Brexit. The market is not prepared for such an outcome, with current pricing only likely reflecting a small chance of this occurring. The market is likely to take a more cautious approach in the lead-up, suggesting a risk-off tone that ought to be NZD-negative. Thus, we wouldn’t be surprised if the NZD lost a cent or two before 23 June.

A vote to Remain would see a sharp bounce-back, while Brexit would see a significant fall in global risk appetite and take the NZD down another leg, threatening the 0.65 mark. This “binary” risk event deserves to be treated with respect.

In the calendar this week, we think that the balance of risk is for NZ Q1 GDP (released Thursday) to surprise on the downside relative to market expectations, which could be NZD-negative at the margin. Earlier, the latest GDT auction should show another modest increase in dairy prices.”