FXStreet (Guatemala) – Analysts at Westpac Banking Corporation broke down the relationship between the Greek debacle and subsequent implications for NZD/USD.
Key Quotes:
“Within the past week, the situation in Greece has moved from wary optimism over a deal to a snap referendum, a breakdown of negotiations and bank closures, with Greek citizens lined up at ATMs to withdraw no more than EUR60 per day.”
“So of course over the past week, the worstperforming G10 currency is…the kiwi. At time of writing, it is -2.9% over the week, with CAD next weakest on -2.1% and EUR middle of the pack on -1.4% in what has been a good week for the US dollar. It hasn’t been a week of major NZ data or events such as a RBNZ policy review, but clearly investors are receptive to the message from the RBNZ that the kiwi is overvalued, most importantly backed by an overt easing stance.”
“The latest lurch lower in the kiwi came after the dairy auction produced a startling -10.8% slide in whole milk powder prices, now sitting at lows since Aug 2009. Some forecasters deemed this cause to predict 3 more rate cuts this year. Westpac however is still on 2 cuts, to 2.75%, albeit with a risk of one more.”
“Our NZ economists note that commodities other than dairy are generally improving, including beef, wool and lamb prices. NZD/USD should remain tilted lower given our expectation for USD gains multi-month, backed by a Sep Fed rate hike.
“Interest rate markets already price an RBNZ OCR near 2.75% by year-end and plenty of bad news on NZ commodities seems to be in the kiwi price already.”
(Market News Provided by FXstreet)