NZD Corporate FX Update
The NZD’s expected recovery is running ahead of schedule, and we lift our year-end target to 0.65
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USD under pressure
The USD has been under considerable pressure for most of this year, peaking before the middle of January and falling between 7-9% depending on which index is used. Of the global majors, SEK, CHF and JPY have gained around 10% or more, EUR, GBP and NOK have gained 6-9% and the commodity currencies AUD, CAD and NZD have gained 2-6%.
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Tariff Turmoil
Since President Trump was elected in November, our central FX projections have been predicated on a moderate Trump II scenario playing out. This assumed a phasing in of higher tariffs but not to the full extent threatened pre-election. We had assumed increased tariffs on China but well short of the mooted 60%, and mostly 10% tariffs on imports from other countries (likely with various carve outs), which culminated in about a 10% increase in the average tariff rate applied to all US imports (from the prevailing average of 2.4%).
NZD/EUR: Cross slumps after EU wakes up
NZD/EUR has been in a downward trend since 2017 based on its 200-day moving average. On 11-March, the cross rate reached a five-year low of 0.5215 on an intraday basis. If we exclude the volatile period at the height of the COVID19 shock, the level reached was the lowest since 2011.
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